Oral Answers to Questions

WALES

The Secretary of State was asked—

Miners Compensation Scheme

Win Griffiths: When the monitoring sub-committee for Wales on the miners compensation schemes for respiratory disease and vibration white finger last met; and what information was provided on payments made under the schemes for Wales and Bridgend.

Don Touhig: The Wales monitoring group met last Monday and reported progress for the whole of Wales showing that by mid-November a total of more than £451 million had been paid under both compensation schemes. Since then, the amount paid has increased by a further £3 million, bringing the total to more than £454 million.

Win Griffiths: I thank my hon. Friend for the great job that he is doing with the compensation claim scheme. Does he have any information for my constituency? As he has been at the forefront of dealing with the scourge of solicitors taking double payments, will he report on how successful he has been in that respect? What is being done to speed up smaller claims under the scheme?

Don Touhig: In my hon. Friend's constituency, £8.5 million has been paid under both schemes—£6.6 million under the respiratory disease scheme and £1.9 million under the vibration white finger scheme.
	We have been working closely with the Law Society to ensure, in respect of solicitors who have taken payments from miners and their widows, that those payments, which belong not to the solicitors but to the miners and their widows, are returned. We are, however, having problems with claims farmers—people who are not solicitors but who act as intermediaries between claimants and solicitors—raking off very considerable amounts of money that do not belong to them. Unfortunately, several miners signed contracts, and it is very difficult to get that money back, although I believe that where solicitors have collaborated with claims farmers a liability should be pressed upon the solicitors.
	As for my hon. Friend's other point, the Government have put to the judge a proposal for a fast-track payment scheme. The judge has approved the scheme, which will be voluntary and for live claimants only. It is hoped that it will start in the new year.

Adam Price: Is the Minister aware that ex-miners who qualify under the Department of Trade and Industry's vibration white finger scheme are currently ineligible to claim industrial injuries disablement benefit because different criteria are used? The Industrial Injuries Advisory Council has called for that anomaly to be rectified. Will the Minister take that up with colleagues at the Department for Work and Pensions on behalf of the thousands of former miners in Wales who are affected?

Don Touhig: I am aware of the hon. Gentleman's point. I have written to colleagues as a constituency MP, and I know that it is a matter of concern to members of the monitoring group in Wales. I have no doubt that we will make representations, as he suggests.

Huw Irranca-Davies: Echoing the comments of my hon. Friend the Member for Bridgend (Mr. Griffiths), I, too, pay tribute to the work of the DTI and the Law Society in returning money that rightfully belonged to miners, their widows and their families but was taken in percentages by claims handlers and other bodies. Can anything further be done to deal with that issue?

Don Touhig: I personally have made it clear on several occasions that those who are involved in taking money in that way are parasites who are preying on vulnerable people—elderly miners and their widows—by taking slices of money that do not belong to them. My hon. Friend refers to claims handlers and others. In Wales, those others include the union NACODS—the National Association of Colliery Overmen, Deputies and Shotfirers—South Wales, which is led by a member of Plaid Cymru. That organisation has been taking 5 and 10 per cent. slices off the top of claimants' payments. That is not appropriate, in my view, and I hope that all Members will join me in urging NACODS South Wales to hand the money back to the miners and their widows, because that money belongs to them, not to the union.

Roger Williams: Many of my ex-miner constituents, particularly those from the Ystradgynlais area, welcome the speeding up of the process. However, the latest figures show that it will not be completed until 2014. Will the fast-track system have any impact on the final settlement date; and will the Minister write to me to let me know what that date will be?

Don Touhig: The judge has accepted the Government's proposals to speed up payments for live claims, and it is hoped that the process will begin next year. It is a voluntary scheme that a miner can choose on the advice of his solicitors, and perhaps his union. There will be banding tariffs of £1,400, £3,700 and £12,900 depending on the degree of disability. The miner will be able to choose whether to take the fast-track route.
	There is an issue about how long it will take to pay off all the claimants—there are 90,000 claims in Wales and it will therefore take a considerable time. However, I am worried that those who have criticised the Government for, they say, delaying the final payments, and claim that the scheme will take too long to pay out now criticise us for introducing a fast-track scheme. I do not suggest that the hon. Gentleman does that, but it has happened. My only comment to those people is to recall the late Aneurin Bevan's words on such matters:
	"you can't have the crown of thorns and the 30 pieces of silver."

Llew Smith: Does the Minister have the total figure that NACODS South Wales has creamed off from the miners compensation fund? Has he any evidence about where the money ends up?

Don Touhig: That remains a deep mystery. I have taken up individual cases from my constituency with NACODS South Wales. I said that I did not believe that my constituents needed to pay the money and I succeeded in getting NACODS South Wales to say that it will not try to gain that money. I cannot imagine what on earth it wants to do with it. At the last count, it had 30-odd members. I have no idea why it needs to claim a vast amount of money from vulnerable miners and miners' widows. I repeat: the money does not belong to NACODS South Wales but to miners and miners' widows. It should give it back now.

Trade Links

Hywel Francis: What discussions he has had with Cabinet and National Assembly for Wales Government colleagues on developing better trade and cultural links with Australia and New Zealand.

Peter Hain: In November, I visited Australia and New Zealand, where I took the opportunity to strengthen business and trade links between Wales and a part of the world that has great opportunities.

Hywel Francis: Several successful small and medium-sized enterprises in my constituency and throughout Wales are developing effective international trade links. Will the Secretary of State outline some of the advantages that accrue to SMEs as a result of his visits and thus counter some of the unnecessary and unwarranted criticisms of them by Welsh nationalists? Will he also enter into discussions with the First Minister of the Welsh Assembly Government to arrange a trade mission specifically for SMEs to eastern Asia and Australasia to counter the "fortress Wales" mentality that is being encouraged in certain quarters in Wales?

Peter Hain: I agree with my hon. Friend that there is great potential for small business investment from overseas countries including New Zealand and Australia, which I visited recently and met representatives of small and large businesses. As a result of a visit to China in April on behalf of Wales, a company has invested in Wales, and others are following.
	It is typically small minded of the nationalist group in the National Assembly to attack such visits, especially given that the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) has said that Ministers should talk up Wales when they go abroad and the hon. Member for Caernarfon (Hywel Williams) has said that we should use the instruments of the British state to promote Wales abroad more effectively. The hon. Member for Meirionnydd Nant Conwy nods. He should sort out his Assembly group in Cardiff—he nods at that, too. [Interruption.] We will all help him to do that.

James Gray: What estimate has the Secretary of State made of the cost of his visits to Australia, New Zealand and China? How does he quantify the benefit of those visits to Wales? What plans does he have to visit Patagonia, where the people still speak Welsh?

Peter Hain: The hon. Gentleman knows that, as I found in China, ministerial visits gain a higher level of access. According to the Welsh Development Agency, which organised the trip to China, there was greater access than ever to business leaders in Beijing and Shanghai. One direct investment resulted from the trip. According to the WDA, the same happened with the contacts that I had in Australia and New Zealand. It is my job as Secretary of State for Wales to bat for Wales and get more jobs for Wales. I shall continue to do that, despite Tory opposition.

Drugs

Huw Edwards: What measures have been taken to combat illegal drug use in Wales.

Don Touhig: The Government take tackling illegal drug use extremely seriously. We work in partnership with a range of bodies, including the National Assembly, the police and the voluntary sector.

Huw Edwards: I assure my hon. Friend that the Welsh Affairs Committee has received evidence from the chief constables of Wales about the success of Operation Tarian in combating illegal drug use. Will he join me in congratulating Gwent police on co-ordinating Operation Reptile and today's announcement of important seizures of drugs, arrests and the taking out of a significant drugs gang? Will he assure me that the Government will continue to support the police in their fight against the drugs trade?

Don Touhig: Yes, I certainly will do that. Indeed, I welcome the announcement today of Operation Reptile. My hon. Friend mentioned Operation Tarian, which came about as a result of the close collaboration between the Home Office, the Wales Office and the National Assembly. Operation Tarian is a police intelligence gathering unit whose aim is to prevent hard drugs from coming into Wales, and it is now in its second year of operation. In year one, 1.7 kg of heroin and cocaine were seized, representing assets worth about £1.7 million. So far this year, about 1 kg of heroin and cocaine have been seized, and 17 individuals have been convicted for supplying illegal drugs. The operation is making good progress and shows the determination of all of us—the Government, the police and the voluntary sector—who are working in partnership to combat this menace in society.

Elfyn Llwyd: I acknowledge the success of Operation Tarian, but there remains a serious drugs problem throughout Wales. The Gracious Speech mentioned intervention, which obviously is good, but may I remind the Minister that there are fewer than 40 rehabilitation beds in the whole of Wales? Regrettably, many towns in Wales need 40 beds each. This is a mammoth task. Will the Minister redouble his efforts to ensure that this matter is properly resourced in Wales?

Don Touhig: Yes, I accept the hon. Gentleman's point. Indeed, he raised it at the Welsh Grand Committee yesterday as well. The drug intervention programme that was launched last year aims to get drug misuse offenders out of crime and into treatment, and the Home Office has made about £5 million available to the Assembly in Wales for that purpose. The Assembly has also launched its own tackling substance misuse partnership approach scheme, which has five modules: community prescribing, needle and syringe exchange, residential rehabilitation, in-patient detoxification and co-occurring mental health and substance misuse. All these measures are working together to tackle this matter, but I recognise that intervention must come as quickly as possible. It is so important to identify that window of opportunity when someone wants to kick their drug habit, so that the system can be there to get them off drugs and bring them the support they need.

Bill Wiggin: The Minister is right to say that drug and alcohol abuse is an escalating problem in Wales. There are only two rehabilitation homes registered for substance misuse in Wales, yet Rhoserchan is threatened with closure while deaths directly caused by illegal drug misuse in Wales have doubled since 1997. What will the Minister do to prevent this home from closing?

Don Touhig: I am not aware of the case to which the hon. Gentleman refers, but he will be aware that tackling this issue is a matter for my colleagues in the Assembly. They have certainly increased the funding for combating substance misuse across Wales. They have created the substance misuse action fund, and substantially increased the amount of funding available from £3.3 million in 2002–03 to £18.5 million by 2007–08. That is an increase of 550 per cent. I regularly have meetings with the Assembly Minister responsible for social affairs, and I value and appreciate the interventions and programmes that the Assembly is progressing. However, I shall certainly take note of the issue that the hon. Gentleman has raised, and if it is appropriate to do so I shall raise it with my colleague Minister in the Assembly.

Antisocial Behaviour

Alan Howarth: If he will make a statement on progress in dealing with antisocial behaviour in Wales.

Peter Hain: Following the Government's lead, the police, community safety partnerships and others in Wales are increasingly using the wide range of powers that we have put in place to tackle antisocial behaviour, and 114 antisocial behaviour orders have been issued in Wales as of June 2004.

Alan Howarth: Is my right hon. Friend aware that, in five wards of Newport, East, crime has been reduced by 15 per cent in six months, thanks to the extra police officers that the Government have provided, and to their deployment to individual wards, enabling them to develop much closer local knowledge? Is he further aware that my constituents greatly look forward to the benefits of tackling antisocial behaviour that will come from the additional police community support officers whom the Government have just announced they will fund from the neighbourhood policing fund?

Peter Hain: Indeed, and the truth is that it is Labour that is making Wales more safe and secure, in our local neighbourhoods and right across the country, and tackling antisocial behaviour despite opposition from the Liberal Democrats and the Conservatives to some of the measures that we have introduced in the House of Commons. We are also recruiting extra community support officers—300 are already in place, with more to come—and we have 800 extra police officers as well. I am delighted that Newport is one of the new action areas that are leading the drive against antisocial behaviour.

Bill Wiggin: Findings from the 2003–04 crime survey report that 92 per cent. of people think that antisocial behaviour has not improved. The chief constable of North Wales told the Select Committee on Welsh Affairs that ASBOs were taking up to four days of court time, and in a Swansea school a cancer victim had her hair set on fire. I am sure that the Minister was appalled by that. Why is he the only one who thinks that things are getting better in Wales?

Peter Hain: If the hon. Gentleman represented an area in Wales, he would know that things are getting better because of the action that we are taking. The truth is that antisocial behaviour, not just in Wales but right across the UK, is a serious problem and has been growing over the decades. We are the Government who are taking action to introduce more antisocial behaviour orders, and working with local authorities, and we will continue to do that despite the sniping from the Conservatives.

Betty Williams: My right hon. Friend will be aware that antisocial behaviour was tackled in the walled town of Conwy by using a dispersal order earlier this year. That was a success, as my constituents do not now feel as intimidated as they used to when going out to evening events. Does he have any data available at this stage to show how successful the use of dispersal orders is in Wales, and whether they are widely used in the rest of Wales?

Peter Hain: I do not have that data to hand, but I agree that such orders can be extremely successful, and ought to be pursued by local police officers and the authorities generally. The point is that they are used right at the beginning, before antisocial behaviour takes hold and wrecks a neighbourhood. Measures are now available, and they should be used by all concerned.

Department for Work and Pensions

Hywel Williams: What discussions he has had with the First Minister of the National Assembly for Wales regarding job losses in the Department for Work and Pensions within objective 1 areas in Wales.

Peter Hain: The First Minister and I have discussed the effect of the efficiency review on civil service jobs in Wales, and the new Department for Work and Pensions contact centre jobs coming to Wales, including 250 jobs at Bangor.

Hywel Williams: I thank the Secretary of State for that answer. I am surprised that he did not mention the fact that 2,600 jobs are being destroyed in Wales by this change, 1,700 of which are in objective 1 areas—the areas that the Government define as being most in need of economic regeneration and as being poor. In that regard, what has he done to make sure that the interests of Wales are fully considered when Government policy is discussed in Westminster?

Peter Hain: We do not accept the figure that the hon. Gentleman quotes in respect of likely job changes and job losses. We are seeking greater efficiency by shifting jobs and resources from back-office staff to front-line services. I would have thought that he welcomed that. I recently met the leaders of the Public and Commercial Services Union in Wales. There are 430 new Department for Work and Pensions jobs in contact centres in Pembroke dock, Bangor and Bridgend, 500 new DWP jobs already in the pension centre in Swansea, 600 new Office for National Statistics jobs coming to Newport, 385 new DWP jobs already in Wrexham and 85 new Customs and Revenue jobs already in Cardiff. Jobs are changing, but more and more investment is bringing more and more jobs into Wales, across the public and private sectors.

Ian Lucas: Wrexham welcomes the redeployment of jobs concluded in February 2004, but there is concern about the integration of Jobcentre Plus and the Pension Service in Wrexham, which could lead to redundancies in the town. Will my right hon. Friend have a word with the relevant Minister in the Department for Work and Pensions to ensure that there are no compulsory redundancies in the Pension Service in Wrexham?

Peter Hain: I will certainly investigate that matter. The objective has been to avoid compulsory redundancies, and the recent discussions with the unions concerned have sought to achieve that objective.

Lembit �pik: The Chancellor says that he wants to move city-based public sector jobs out to the regions, including to Wrexham. Staff in local centres such as that in Newtown fear that their jobs might also be moved to Wrexham, which, ironically, would mean shifting work from smaller to larger conurbations. I do not expect the Secretary of State to make policy at the Dispatch Box, but would he be willing to meet a delegation of Department for Work and Pensions staff to discuss their concerns and the case for keeping work at existing rural locations such as Newtown?

Peter Hain: I understand the hon. Gentleman's point, and we will consider a meeting. He will also want to know, however, as I said a moment ago, that I met the leaders of the PCS and our discussions and contacts will remain.

Bill Wiggin: The Secretary of State was talking about the number of jobs created in north Wales. Whether the number of jobs lost from the Department for Work and Pensions is 2,600 or some other number, it will mean that people will now have to telephone a call centre in Bangor. Will that achieve better delivery of front-line services, or will it experience the same problems as out-of-hours general practitioner services?

Peter Hain: I am surprised that the hon. Gentleman asks the question, as there is Welsh language provision for the Bangor call centre.
	The truth is that we are providing more and more jobs in the public sector, in front-line services and in the private sector as a result of the dynamism of the Welsh economy. That contrasts with the dreadful record under the Conservatives. Talking of Conservative policies, may I ask the hon. Gentleman whether he cleared with the shadow Chancellor the fact that the Welsh budget will not be affected by the 35 billion of savings and cuts that the shadow Chancellor wants to make? England, not Wales, will have to bear the cost of those savings.

Dee Estuary

Ben Chapman: What recent discussions he has had with English local authorities and environmental bodies regarding dredging in the Dee estuary.

Don Touhig: Consideration of the port of Mostyn's dredging proposals is a matter for the National Assembly, the Environment Agency and the Department for Transport. As my hon. Friend knows, my right hon. Friend the Secretary of State and I have taken a close interest in this matter.

Ben Chapman: Does my hon. Friend agree that given the environmental importance of the estuary, the habitats directive demands full consideration of the alternatives to dredging? Does he share my hope that when the Environment Agency Wales reaches a minded to position, it will take full and balanced account both of realistic commercial, but perhaps temporary, considerations and of the permanent need to protect the ecology of the estuary?

Don Touhig: I know that my hon. Friend has been a strong advocate for his constituents on this issue. The Environment Agency recently submitted an application for a regulating order to manage the cockle beds in the estuary. The area concerned covers both England and Wales, although of course the Department for Environment, Food and Rural Affairs is in the lead in this case. DEFRA and my colleagues in the Welsh Assembly are preparing a draft order, which should be ready for public consultation in the new year. I know that my hon. Friend will want to be kept closely informed of developments.

Small Businesses

Henry Bellingham: What representations he has received from small business organisations on central Government regulation of small firms in Wales.

Peter Hain: My hon. Friend the Under-Secretary of State and I have regular meetings with representatives of the business community to discuss issues that concern them.

Henry Bellingham: Does the Minister agree that the European Union agency workers directive will be highly damaging for small firms in Wales? What is his view of it, and what advice has he given Welsh Labour MEPs?

Peter Hain: As the hon. Gentleman knows, last week the Chancellor announced new measures to ensure that small businesses are not affected by over-burdensome EU regulations. He may also know that the small business sector has had a very successful record in Wales recently. The Welsh business survival rate is higher than the United Kingdom average. We had 7,000 business start-ups funded by the Assembly in the last financial year, and in October we had the 19th consecutive month of business growth.
	As the Leader of the Opposition is now present, may I ask him whether he cleared the fact that the ring-fenced Welsh budget will not

Mr. Speaker: Order. I call Mr. Rosindell.

NHS Dentistry

Andrew Rosindell: What discussions he has had with the National Assembly for Wales on improving the provision of NHS dentistry in Wales.

Don Touhig: I shall be having a bilateral meeting on Monday.

Mr. Speaker: The hon. Member for Romford is allowed a supplementary question, but he appears not to want to ask one.

Antisocial Behaviour

Mark Tami: What discussions he has had with the First Minister on combating antisocial behaviour in Wales.

Don Touhig: My right hon. Friend and I have regular discussions with the First Minister about matters affecting Wales.
	Following the Government's lead, the police, community safety partnerships and others in Wales are increasingly using the wide range of powers to tackle antisocial behaviour.

Mark Tami: I welcome the many moves that have been made to deal with antisocial behaviour, but does my hon. Friend agree that there is still progress to be made, and that we can learn from the success of many areas, including Manchester, in making the legislation more effective?

Don Touhig: I certainly agree with the point that my hon. Friend makes. The important message to get across is that this Government are tackling the problems of antisocial behaviour in our communities. We are putting in the resources and funding, providing extra police officers and community support officers, and introducing the appropriate legislation. That should be contrasted with the policy of the Conservatives, who are committed to 35 billion-worth of cuts, which would wreck our public services and destroy all that we are doing to combat antisocial behaviour. Of course, the Liberal Democrats campaign against antisocial behaviour in the constituencies, but vote against every such measure that we bring before the House.

PRIME MINISTER

The Prime Minister was asked

Indonesia

Win Griffiths: what plans he has to visit Indonesia in the next three months to meet President Bambang Susilo Yudhoyono to discuss British support for, and co-operation with, Indonesia in the campaign against the threat of terrorism.

Tony Blair: I have no current plans to meet the President of Indonesia. However, senior officials have been to Indonesia for discussions with the new Government on a range of issues, including co-operation on counter-terrorism. A Foreign Office Minister will attend the European Union and Association of South East Asian Nations meeting in Indonesia in March 2005.

Win Griffiths: I thank my right hon. Friend for that positive response. He doubtless does not need to be told that if terrorism is to be defeated in Indonesia and the wider world, it is vital that the newly elected President Bambang Susilo Yudhoyono be given our full support in his efforts to continue the reform process, to develop good governance and justice, to fight corruption and to promote sustainable economic prosperity. Will my right hon. Friend ensure that his Ministers in the Department of Trade and Industry, the Department for International Development and the Foreign and Commonwealth Office work closely to encourage trade missions and British investment in Indonesia?

Tony Blair: Well, we will give the President[Interruption]every support. In particular, we welcome and applaud Indonesia's counter-terrorism efforts, including the detention of more than 100 members of the Jemaah Islamiyah organisation, the arrest of some of the perpetrators of the Marriott attacks in Bali, and the investigation into the attack on the Australian embassy. The point that my hon. Friend makes is absolutely right: it is important that we intensify counter-terrorism efforts, since Indonesia, as well as many other countries, faces the threat of terrorism. But I also agree that it is when we tackle poverty and economic development in Indonesia that we will also make an impact on the underlying causes of terrorism.

Engagements

Desmond Swayne: If he will list his official engagements for Wednesday 8 December.

Tony Blair: This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I will have further such meetings later today.

Desmond Swayne: At the beginning of this week, Jonathan Baume, the leader of the First Division Associationthe mandarins' unionwas quoted on Radio 5 as saying that, at times, No. 10 and the Chancellor's office have competing and conflicting agendas, and that civil servants and Ministers are having to make sense of this battle. Why did he say that?

Tony Blair: I cannot answer why he said it, but what I can say is that I am delighted that the hon. Gentleman has given me the opportunity to point out that under this Government and this Chancellor, we have had 2 million extra jobs; the lowest levels of inflation, unemployment and mortgage rates for 30 years; a strong economy; investment in health and education; and falling crime. That is surely enough to please even the hon. Gentleman.

Mike Wood: My right hon. Friend will know that PC Ian Broadhurst, a constituent of mine, was shot dead in Leeds on Boxing day last year. It now transpires that the bullets used in that killing and in the attempted murder of two of his colleagues were home-made. The components and the machine necessary to produce that ammunition were bought over the counter, with no questions, no vetting and apparently no checks whatever. Will my right hon. Friend pledge his and his Government's support for the campaignlaunched by PC Broadhurst's mother, Cindy Eatonto have this loophole in the law closed quickly?

Tony Blair: Once again I extend my sympathy to the family of my hon. Friend's constituent and say how sorry I am for the situation in which they find themselves after a tragic and brutal murder. We are studying carefully the facts of the particular case and are aware of the campaign on behalf of the family. We hope to make a response shortly. I entirely agree with my hon. Friend that the way in which these items are sold over the counter is a very important issue, and we need to ensure that the law is tough enough to deal with that problem.

Michael Howard: Yesterday, the Metropolitan Police Commissioner said that he totally supports the private Member's Bill to change the law on self-defence against burglars. Will the Government support it too?

Tony Blair: What we have said is that we will consult chief police officers, the Crown Prosecution Service and, indeed, the Attorney-General. I entirely understand the concern about this particular issue and I share the general view of the Metropolitan Police Commissioner. If we get the right response from those people, we will, of course, support a change in the law. As I understand it, the particular private Member's Bill has not yet been published. We will have to consider the best way to take it forward, but I entirely share and understand the concern and hope that we can reach agreement on it.

Michael Howard: I am very glad to hear that, once again, where we lead, the Prime Minister follows. Can the Prime Minister tell us why the Lord Chancellor said this week that the law did not need to be changed?

Tony Blair: First, let me deal with the issue of the right hon. and learned Gentleman leading and us following. The Home Secretary said that he was prepared to review the law on this matter a couple of months ago, and the right hon. and learned Gentleman jumped on the bandwagon only when he thought that there was something in it for him. I would have thought that we could deal with this issue perfectly sensibly. I entirely understand the concern. The Law Commission looked into it and said that the law did not need changing. I believe that the number of circumstances in which someone was convicted after taking on a burglar in their home would be very limited. None the less, in the light of recent concern, it is worth looking into whether we need to clarify the law in order to send a clear signal to people that we are on the side of the victim, not the offender.

Michael Howard: The right hon. Gentleman talks about bandwagons, so I will tell him about bandwagons. This is the man who joined Michael Foot's bandwagon to get into the Labour party; joined the Campaign for Nuclear Disarmament bandwagon to get on in the Labour party; and did over his Chancellor's bandwagon to take over the leadership of the Labour party. He is Mr. Bandwagon. Now let us get back to the question, which the Prime Minister manifestly did not answer. The Lord Chancellor said this week that the law did not need to be changed. Why do his Government say one thing one day, and something else the next?

Tony Blair: What discomfited the right hon. and learned Gentleman is that I gave him an answer that he did not expect in reply to his first question. There is genuine public concern about this matter and we want to meet it. I am sure that the right hon. and learned Gentleman does as well, so rather than engaging in rather absurd point scoring across the Dispatch Box, why not simply agree that, on the basis of advice from chief police officers, the Crown Prosecution Service and the Attorney-General, we will bring forward proposals, consult the other parties in the House and try to reach a sensible agreement on this matter?
	Let me make one thing perfectly clear to the right hon. and learned Gentleman. It is as a result of the measures taken by the Government that crime is down, burglary is down and extra numbers of police are on our streets. If we took the measures that he and his shadow Chancellor are going to implement, we would be cutting the number of police officers on our streets.

George Howarth: Does my right hon. Friend agree that the hand of history now rests on the shoulders of the hon. Member for North Antrim (Rev. Ian Paisley)? Does he further agree that that hon. Gentleman should accept the leadership that the people of Northern Ireland have placed in his hands and say yes?

Tony Blair: I think that the issue will be very clear once we publish the documents and proposals that we have been working on in the past few weeks. As the House will understand, we have worked extremely hard over the past seven years to secure peace in Northern Ireland, with power shared between all parts of the community and all parties, based on a commitment to exclusively peaceful and democratic means. The essence of that agreement is now in place, but the question is whether it can be implemented in such a way that it gains sufficient confidence on both sides of the community. We will carry on doing everything that we possibly can to bring that about.
	I pay tribute to everyone who has been engaged in this process over the past few months. I think that people will see later today that we have made immense progress, and what I have learned above all else in respect of Northern Ireland over the past few years is that any setbackin any shape or formshould simply be a reason for us to redouble our efforts and carry on trying.

Charles Kennedy: Given that the Prime Minister has admitted that the Government will fail to meet their climate change targets, how does he expect the British public to have faith in his declared ambition to lead the industrialised worldincluding President Bushin tackling the climate change issue successfully, once and for all?

Tony Blair: First, I want to make it clear that there are two targets, both of which relate to 1990. The Kyoto targets are our international obligation, and we will meet themindeed, we have met them already. We are one of the very few countries in the world that will meet those targets, and we can be proud of that. It is true that we set an even tougher target for ourselves on CO 2 emissions. Instead of a 20 per cent. reduction, we will achieve one of 14 per cent., but there are years to go before we must reach the higher target. As we say today, we do not accept that we will not meet that target, but again, we must make sure that we take the measures necessary to meet it.

Charles Kennedy: The problem is that all the plans and strategies that the Prime Minister has reiterated this morning would have sounded great in the first seven days of a newly elected Labour Government, but we are now in the seventh year of this Labour Government. What practical and effective steps does the Prime Minister propose to take on issues such as tackling aircraft pollution, reforming the climate change levy successfully, and achieving a reduction in domestic energy consumption? Is not this yet another example of the Prime Minister talking a very good game and persuading himself, but failing to deliver in the end?

Tony Blair: The right hon. Gentleman has rather glossed over what I actually said, which is that we will meet our Kyoto targets. On CO 2 reduction, we have set a target of 20 per cent. and are on track to achieve a reduction of 14 per cent. We must do even more, but I shall list some of the things that we are doing. We have set a target for renewable energy levels by 2010. We are putting an obligation on energy suppliers to produce an increasing proportion of energy from renewables. We have the climate change levy, and I hope that the whole House will support us in maintaining that, but I remind the right hon. Gentleman that we had to force it through when we introduced it. We have the emissions trading agreement, which is also extremely important, and the measures announced in the pre-Budget report for energy efficiency innovation, on which we are spending hundreds of millions of pounds. It is not true that we will fail to meet our international target: we will meet it. We have more to do to meet our domestic UK targets, but we are taking the measures necessary to do that.

Law and Order

Graham Allen: When he next intends to visit Nottingham, North to review progress of cross-departmental working on law and order issues; and if he will make a statement.

Tony Blair: I have no current plans to do so. However, I am always pleased to see good progress in cross-departmental working on law and order issues. As my hon. Friend will know, my right hon. Friend the Home Secretary's full ministerial team visited the region on 4 and 5 November. They saw some 26 projects in the region, including several focusing on community safety. They also engaged in discussions with local people. That is precisely why it is important that we continue with cross-departmental working, particularly in order to reduce antisocial behaviour in our communities.

Graham Allen: The Government are doing all that they can from the centre to tackle law and order problems, including introducing welcome legislation and massive resource provision. However, that must have an echo at a local level, with people being reunited with the criminal justice system. Most people in my constituency do not know what the Crown Prosecution Service is, or the probation service or magistracy. Will my right hon. Friend accept that the next phase of our attack on crime must be to organise a crusade to link every tenants association and neighbourhood watch back to the criminal justice system, so that we can effectively progress the fight against crime?

Tony Blair: I agree with my hon. Friend and that is why the local criminal justice boards were established. It is obvious, when we look at antisocial behaviour, that many communities are now using the extra powers and the extra police officers and community support officers, and they are getting local partnerships working. The powers are there and the resources are there, buthe is rightit does require local people on the ground to use those powers and resources adequately. What we can and do provide from the centre is the framework within which that can happen. Many hon. Members will know from their constituents that even though there are still major problems with antisocial behaviour, real and good work is being done by the police, local authorities and others on the ground to tackle that menace.

Engagements

Howard Stoate: I can tell my right hon. Friend that the extra investment in health in Dartford is extremely welcome, with an accident and emergency extension and a 9 million treatment centre being built at my 3-star Darent Valley hospital, and a 2 million local improvement finance trustor LIFTprogramme to modernise general practices in the area. As he is aware, the Thames gateway is a massive regeneration and growth area with significant projections for new jobs, housing and population. Can he reassure my constituents that the extra investment needed in infrastructure, especially in health, education and transport, will be sustainable in the future?

Tony Blair: I can give my hon. Friend that assurance because, as part of the Thames gateway project, we will ensure that there is the proper investment in the infrastructure in those areas. He is right to say that the improvements will come from the LIFT programme, but they will also come from the reduction in the waiting lists, the investment in hospital buildings, and the increases in the number of nurses and doctors, which are yielding results. As one of the international reports indicated this week in relation to health care, the UK now has one of the fastest improving health care systems anywhere in the world.

Michael Howard: In Labour's first term, crime rose, detection rates fell and the number of asylum seekers more than doubled. Presumably the Prime Minister agrees with his current Home Secretary, who thinks that after four years of Labour Government he inherited a giant mess?

Tony Blair: At least he never said there was something of the night about him. Let me remind the right hon. and learned Gentleman that in our first term crime fell under this Government, and under this Home Secretary crime continues to fall and we have record numbers of police officersas opposed to the record of the right hon. and learned Gentleman, who cut the numbers of police officers. Not merely have we got record police numbers: we have community support officers as well.

Michael Howard: I shall tell the Prime Minister what his Home Secretary says about me. He thinks that I was the first Home Secretary to focus on cutting crime. That is what he says. Now I shall tell the Prime Minister what his Home Secretary thinks about the current Foreign Secretary's time at the Home Office. [Laughter.] Wait for it. He says:
	It was worse than any of us had imagined possible. God alone knows what Jack did for four years. I am simply unable to comprehend how he could have left it as it was. It was a giant mess.
	He does not stop there. He thinks that the Secretary of State for Culture, Media and Sport is weak; the Secretary of State for Trade and Industry does not think strategically; and the Secretary of State for Education and Skills has not developed as expected. He also says that the Prime Minister does not like being told the truth andas no doubt the Prime Minister will agreethat the Chancellor is a bully. Could the Prime Minister please arrange for the Home Secretary to make regular reports on his Cabinet colleagues and place them in the Library?

Hon. Members: More!

Tony Blair: I think that we have had quite enough. Since we are talking about records as well as the comments that people make[Hon. Members: Oh!] Well, the right hon. and learned Gentleman does not actually want to discuss the alternative records of his time in office and our time in office, but that is what I am going to do. When he was responsible for employment, it went down and unemployment went up by 1 million[Hon. Members: Ah!] That is right, is it not? When the Home Secretary was in charge of employment, unemployment fell by 500,000. When we were in office, we increased the investment in health and education, we got mortgage rates down and we got inflation and unemployment down. People remember not the comments but the record, and it is the record of the right hon. and learned Gentleman's time in government that we will concentrate on between now and the election.

Julia Drown: Given that absolute poverty kills a child every three seconds, has the Prime Minister seen the Make Poverty History early-day motion, which has more signatures than any other on the Order Paper? What is he doing in preparation to make next year the year when the international political will is created to make poverty history?

Tony Blair: The main focus will obviously be the UK's G8 presidency. The Commission for Africa report will be published in March, and will focus not just on increasing levels of aid but on removing trade barriers for the poorest countries in the world, by making sure that we have the right framework for conflict resolution in Africa, since it is often conflict in Africa that creates disease, famine and death. We will also make sure that we are reducing debt levels. In other words, there will be a comprehensive plan for Africa. I hope that we can get it agreed at the G8 and then, literally, take it out to every part of the international community and get the necessary action. I know that my hon. Friend will agree that we are leading the way on these issues and as a result of the successful management of the economy, as well as increasing investment in our own health and education services, we have been able to treble aid to Africa, to reach 1 billion a year, which ties in very well with the campaign that will be launched right across the country to make poverty historya campaign that we fully support.

Graham Brady: If a police officer makes an improper expenses claim, he will face disciplinary action. He then has the right of appeal to the Home Secretary. How can this Home Secretary sit in judgment on any such appeal?

Tony Blair: I do not agree with the hon. Gentleman. If any claims are made, they can be submitted to the normal authorities here and investigated.

Mark Lazarowicz: One of the proposals in the Queen's Speech was for a Bill on consumer credit, and that proposal received almost universal acclaim from consumer groups, Citizens Advice and the majority of the financial services industry. Given such widespread backing, may I urge the Prime Minister to ensure that the Bill is introduced sufficiently early in the Session to give it a good chance of becoming law if by some chance there were to be an early Dissolution of this Parliament?

Tony Blair: It is important that we give consumers proper protection and we are doing that. We shall also be providing money to help more people to establish bank accounts and to deal with some of the problems of financial exclusion from the banking system. The measures that the Chancellor announced last week will make a major impact in that regard, but I agree with my hon. Friend that the Bill would be an important piece of legislation and I hope that it will command support right across the House as that would hasten its progress.

Paul Holmes: As the Prime Minister will know, by next summer all councils must have held compulsory ballots of their tenants on stock transfer. The ballot options are financially rigged by the Government against the option of staying with the council rather than opting for a housing association or private finance initiative landlord. Will the Prime Minister explain to my constituents in Chesterfield, a quarter of whom are council tenants, and to his own Back Benchers, why he and his Government have such a dogmatic, ideological prejudice against those who democratically vote to remain council tenants?

Tony Blair: That is a very odd point to make. We are giving people a vote; I think that there have been more than 150 already, and 70 per cent. or more voted in favour of the change. People should be able to make up their minds; where they vote for change, they believe that it is in their interests. The hon. Gentleman should allow his constituents the right to vote on that, as the Government's purpose is actually to give his constituents the chance to decide their own future.

Hugh Bayley: Not a road or pavement in any town or city in the country is not smeared and disfigured with great white blobs of chewing gum. What penalties will the Clean Neighbourhoods and Environment Bill impose on people who drop chewing gum in the streets? Why do not manufacturers sell chewing gum in packets that contain a slot in which to put used gum; and should not the packets have a warning showing the penalty for dropping chewing gum in the streets? Perhaps the manufacturers should pay for cleaning up the mess that their customers create.

Tony Blair: I had not quite appreciated what a social evil chewing gum was until my hon. Friend made that impassioned plea. Of course, there are provisions in respect of litter in the Clean Neighbourhoods and Environment Bill, but they are part of a general series of measures that will allow local communities to deal with issues such as fly-tipping, abandoned cars, graffitithe things that really degrade and devalue the look of an areaand along with the other measures that the Home Secretary has announced, will result in the most comprehensive programme of measures on antisocial behaviour that this country has ever seen. Many people, including some hon. Members, were doubtful about the importance of those measures on antisocial behaviour, but they now recognise that they are actually working in communities up and down the country.

Alistair Carmichael: Does the Prime Minister accept that, for this country to comply with its international legal obligations, we must hold a full, independent inquiry into the number of civilian casualties in Iraq since the invasion last year?

Tony Blair: I do not accept that. In our view the figures from the Iraqi Ministry of Health, which has surveyed the hospitals there, constitute the most accurate survey that there is, but me just make this point to the hon. Gentleman and, through him, to the authors of the letter today: those who are killing innocent people in Iraq todaythose who are responsible for innocent people dyingare the terrorists and insurgents who want to stop the elections happening in Iraq. Any action that the multinational force or the Iraqi army is taking in Iraq is intended to defeat those people, who are blowing up innocent people, preventing people from joining the police force and killing innocent aid workerskilling anyone trying to make the country better.
	So let us be quite clear about this. If we want to stop any civilian deaths in Iraq, the best way to do so is for the hon. Gentleman and others to come behind the electoral process, come behind the UN-appointed Iraqi Government and ensure that we stop the terrorism and start the democracy.

Ivan Henderson: By the middle of next year, four new schools will be built in my constituencythree new primary schools and one secondary schooland 24 schools have been involved in an education action zone. Last week, they celebrated the success of that education action zone. They are now moving into school clusters. Will my right hon. Friend assure me that the support for the education action zone will remain there for the school clusters in the future?

Tony Blair: I can assure my hon. Friend that the record investment going into our schools will remain in place. That money is set aside. Over the next few years, there will be a massive injection of capital funding. In any constituency in this country, we can see the difference in school buildings, extra computers, extra teachers and extra classroom assistantsof course, that turns up in the best results for 11-year-olds, GCSEs and A-levels that this country has hadand every single penny piece of that investment was voted against by the Conservative party.

Tony Baldry: May I ask the Prime Minister a question of which I have given him notice? Is he aware that less than half of home-owning pensioner households are claiming the council tax benefit to which they are entitled, so a staggering 750 million goes unclaimed each year? Having been successful in the ballot for private Members' Bills, I intend to introduce a one-clause Bill that, I hope, would better inform and better enable those pensioners to claim that council tax benefit. Will the Government support such a Bill?

Tony Blair: Obviously, on the support for the Bill, we would have to see the specifics of it, and I understand that the hon. Gentleman is in discussion with the Secretary of State for Work and Pensions. Incidentally, I thank him for notice of his question. Of course we support the principle of getting as many people as possible the benefits to which they are entitled, and we have made certain changes both to the forms that people have and in relation to the information campaign, to ensure that people get the information that they require. I am afraid that we will have to look very carefully at whether we can go further and engage with the statutory responsibility in the way he describesthere are obviously a lot of ramificationsbut in general, of course we want to ensure that the more generous payments that we are giving to people, particularly with things such as pension credit, actually get to them. But I am afraid that, on the specifics of the Bill, we will have to wait until the outcome of the considerations that he and the Secretary of State for Work and Pensions must have.

Jim Cunningham: Given the present security situation in Iraq, is my right hon. Friend confident that the January elections can take place?

Tony Blair: Yes, I am. I emphasise that the elections are overseen byindeed, the terms of them are dictated bythe United Nations. The United Nations people engaged in the process believe that the elections can take place. Somewhere in the region of more than 200 parties have registered to participate in the elections. All the information that we have from people in Iraq is that they are desperate to take part in the elections.
	This is a good moment to talk about elections in Iraq, the day after President Karzai was sworn in in Afghanistan, a country that for years and years was a failed state, run by a gang of murderers, thugs and fanatics. It is now a country in which millions of peoplemen and womencan vote. That is the same vision as we have for Iraq. If we succeed in that vision, Iraq and the world will be a more stable and safer place.

John Wilkinson: Is the Prime Minister proud of the measure stealthily slipped into the pre-Budget report, whereby the tax on orphan assets in life insurance policies is to be raised to 30 per cent. from 10 per cent.? Is he aware that the chief executive of Norwich Union, the biggest life insurer in the country, calls that a disgraceful clobbering of his policyholders, and that it will cost them 150 million over the life of their policies? Is he not satisfied that damage enough has been done with the removal of dividend interest tax relief on pension funds? Why clobber the pensioners and retiring people twice?

Tony Blair: I do not accept that. There have been discussions with all the institutions over a period of time on the issue. There is a balance of funding review, as the hon. Gentleman knows, and we should await its outcome.

Orders of the Day
	  
	Commissioners for Revenue and Customs Bill

[Relevant document: The Ninth Report from the Treasury Committee, Session 200304, on The Merger of Customs and Excise and the Inland Revenue, HC 556.]
	Order for Second Reading read.

Dawn Primarolo: I beg to move, That the Bill be now read a Second time.
	The Bill implements the principal recommendations of the O'Donnell review of the revenue departments. It brings together the Inland Revenue and Customs and Excise to create a single new department called Her Majesty's Revenue and Customs. It also establishes a new, fully independent prosecutions office, the Revenue and Customs Prosecutions Office. This office will provide independent scrutiny of all Her Majesty's Revenue and Customs prosecution cases, and will conduct prosecutions where appropriate.
	It is principally a machinery-of-Government Bill to implement sensible reforms to tax administration, and I was pleased to hear the shadow Chancellor support that when he said in the debate on the Loyal Address last week:
	The Treasury's Bill on the merger of the Inland Revenue and Customs and Excise carries our general support.[Official Report, 1 December 2004; Vol. 428, c. 636.]
	I therefore look forward to a constructive and useful debate on the detailed measures. Before I go on to discuss those, I should like to take a moment to thank members of the Treasury Committee for their excellent work, which culminated in the recently published ninth report, exploring the issues around the merger of Customs and the Inland Revenue.

Teddy Taylor: Will the Minister comment briefly on the employment implications of the proposals? Will they be substantial or limited? Can she give us any idea?

Dawn Primarolo: I shall address that in the course of my remarks. If the hon. Gentleman forgives me, however, I will continue to pay fulsome tribute to the Treasury Committee's report.
	I welcome the Committee's endorsement of a pragmatic approach to legislating for the creation of the new department. I have carefully considered all the points contained in its thorough report and will respond to them. Although it is not a matter for the Bill, for completeness I shall quickly clear up one concern that the Committee raised about the clarity of ministerial accountability arrangements for the new department. David Varney, the prospective chairman of Her Majesty's Revenue and Customs, wrote to the Committee Deputy Chairman, who I am pleased to see is in his place, on 15 October to help with this matter. The position is clear. I shall be the departmental Minister for HMRC, and all Treasury Ministers have lead responsibility for specific matters. Such arrangements are normal in central Government departments. We regularly review such arrangements and, as suggested by the Treasury Select Committee, we shall review these arrangements as the merger progresses.
	I shall return in more detail to the other points raised by the Committee in the course of my remarks and, no doubt, as we discuss the relevant clauses in more detail in Committee. As I have said, I am pleased that the shadow Chancellor and the Treasury Committee are not alone in their support for integration. Over the summer my officials have conducted a programme of consultation with representatives of the new Department's stakeholder groups to inform the development of the Bill. A summary of that consultation is reproduced as an annex to the regulatory impact assessment. I am pleased to say that support for integration was almost universal.
	I shall explain what I mean by integration. I am talking about a major change in the way in which taxes and revenues are administered. This is not about shuffling a few Whitehall deckchairs, creating a new department and then assuming that the job is done. It is far more fundamental than that, as the Treasury Committee highlighted. I am talking about a process that goes beyond a simple merger of departments. It is a process of real integration, of bringing the two existing departments together and developing better new ways of working. It is about delivering truly joined-up services to taxpayers, and about creating an organisation that can meet taxpayers' needs because it can look across their affairs and tailor its services to their particular circumstances.
	The question of meeting taxpayers' needs is a key one. That means that integration must mean different things in different parts of the businessanother point touched on by the Treasury Select Committeewith parts of the business with very similar activities and remits merging in their entirety. For example, there are the corporate services; business areas with similar stakeholders or functions fully integrating their structures and activitiesfor example, the large business serviceand other parts of the business that deal with a unique group of stakeholders not shared by other parts of HMRC connecting into the new Department structure. One example is some of the frontier protection work.
	That sounds like a huge job and of course it is. Integration cannot be delivered overnight nor can it be delivered in this Bill alone. I shall give the House some idea of the scale of the task.

Andrew Turner: Before the right hon. Lady moves on, I thank her for mentioning frontier protection work. The Bill proposes the saving of 16,000 posts by 200708. There is already considerable dissatisfaction with the extent to which our borders and ports are left open to smuggling. The Bill appears to be driven more by revenue than by the prevention of smuggling. Will the right hon. Lady assure me that our ports will be better protected as a result of the Bill and not less well protected?

Dawn Primarolo: The hon. Gentleman confuses two subjects, one of which is not connected with the Bill. When he refers to reductions in staff across the Inland Revenue and Customs and Excise and to savings of 16,000 posts, he is referring to the Gershon efficiency savings, not the Bill. If the hon. Gentleman looks at the regulatory impact assessment, he will see that the proposals surrounding the merger are very different from those that he has suggested.
	I hope to make it clear in the debate that the Bill takes every opportunity to protect the current functions of both departments. It involves a change in the machinery of government to allow the departments to start to come together and, over the period of integration, many issues will need to be addressed. However, I absolutely assure the hon. Gentleman that the figure of 16,000 that he quoted is not correct.

Andrew Turner: Will the right hon. Lady give way?

Dawn Primarolo: I will give way again, but if the hon. Gentleman looks at the regulatory impact assessmentI do not believe that he has it with himhe will see that figures are given for the expected savings across all the departments. They involve 100,000 staff and they will not have the impact that he fears.

Andrew Turner: I am grateful to the right hon. Lady for giving way again. Among other things, the press notice issued by her Department on 23 November said:
	Through delivering a single Department, the Bill would . . . Enable the new department to meet its demanding Public Service Agreements and realise efficiency savings, with integration contributing 3,000 posts towards total savings of 16,000.

Dawn Primarolo: Yes, but if the hon. Gentleman will allow me to make progress, I can specifically address that point. We are discussing the merger Bill today, not the efficiency savings that are in the agreements arising out of the Gershon review. My speech will touch specifically on the reductions in staff anticipated as a result of the departments being merged and duplication being removed. I will also touch on safeguards, efficiencies and the delivery of services. If the hon. Gentleman is a little patient, I will be happy to give way to him again if he feels that my remarks have not addressed the points that he has raised.
	The Inland Revenue and Customs and Excise are among the oldest Government departments. The Inland Revenue can trace its history back more than 300 yearsit is a rather junior partner in some senseswhile a nationally organised customs system dates back to the 13th century.
	The new department will have more than 30 million taxpayers and stakeholders, of which 4 million are businesses. HMRC will collect more than 400 billion a year in receipts and pay out over 25 billion in tax credits and child benefit. The costs of running HMRC will amount to some 4.8 billion a year, and the department will have nearly 100,000 staff; 20 per cent. of the civil service. It is a huge task and I very much understand the hon. Gentleman's point about the continuation of services through the period of change.
	Given the huge task, it is not particularly surprising that the Treasury Committee has suggested that further primary legislation is required fully to implement integration. Of course, as we the start the process of integration, I cannot confirm what will be needed, but I can say that we will be doing further work with David Varney, the prospective chairman of the new department, to look at how it should manage its business. If legislative change is needed to support our conclusions, it will be brought forward in an appropriate form for consideration by the House.
	Delivering real, meaningful integration is a process that should be measured in years, not weeks. That has been acknowledged by all those who have commented on the Bill. It must be an ongoing process of continual improvement; a process that identifies and responds to taxpayers' needs, involving proper consultation where appropriate to produce robust and effective new policies. It must develop and exploit new technologies and working methods to create the integrated, coherent and consistent approach that we all seek, and that taxpayers rightly expect.
	The Bill is, and can only be, the first step in that process, but it is a vital step. It creates the organisational structures within which the process of integration can develop. Without the Bill, that process of improving the way in which we deliver services to taxpayers cannot even start in the systematic way that we all want.
	I shall explain briefly why integration is so important. The O'Donnell review identified clear benefits from integration that will pay real dividends for people and businesses throughout the UK, and are vital to ensuring that this country remains a highly competitive place to do business. Foremost among those benefits are the improvements to taxpayer or customer focus that integration can deliver. The delivery of more joined-up services will result in a more consistent and coherent approach to taxpayers' affairs. Understanding taxpayers and taking a view across their affairs is essential to deliver a world-class service, built on support for taxpayers that is tailored to their needs.
	We have already started identifying areas where this approach would be beneficial. The Chancellor's announcement at the pre-Budget report of a new small business unit at the heart of the new department is a key example. Improvements to the use of information within the new department should, as IT capability is developed, reduce the need for taxpayers to supply the same information several times over. The Chancellor's pre-Budget report announcement of work to develop ways of minimising the requirements on small businesses through, for example, a single tax return for all taxes and a reduction in the number of forms, is a key component of this agenda. Returning to the point made by the hon. Member for Isle of Wight (Mr. Turner), that will bring efficiency savings for business and Government alike.
	The same developments that will improve the taxpayer experience will also improve the effectiveness of revenue administration, helping to reduce the tax gap. Better use of information, built around an ability to look across a taxpayer's affairs, will allow for more effective targeting of resources to areas of risk. That will improve fairness, making it harder for those who seek to avoid their obligations to succeed, and reducing unnecessary interventions in the affairs of honest taxpayers. There will also be efficiency improvements. Through economies of scale and alignment of common areas of activity, integration will produce efficiency savings of 3,200 posts by 200708.
	The Treasury Committee's report rightly suggested that a detailed analysis of the costs and benefits of integration would be helpful. The regulatory impact assessment published alongside the Bill sets out the costs and benefits of the legislation. Future substantive proposals for legislative reform will also be accompanied by regulatory impact assessments in the usual way, so that the costs and benefits of particular measures to effect integration can be considered. That further addresses the hon. Gentleman's point with regard to progress on integration over a period of time.

David Laws: The Paymaster General is right to say that the regulatory impact assessment contains some, but perhaps not all, of the costs relating to the merger. Will the merger result in a net cost saving over the period of the existing spending review? Will there be a total saving, taking into account all the cost savings and all the additional costs?

Dawn Primarolo: I shall make two points to the hon. Gentleman. First, the regulatory impact assessment includes an initial setting-up cost of 75 million for the department. If further costs are incurred, they will be identified in any subsequent regulatory impact assessment. Secondly, on savings, over the period to 200708, the reduction of 3,200 posts will produce a net saving in the region of 500 millionI will make sure that that figure is exactly rightby taking out duplication.

David Laws: Will the Paymaster General clarify whether the 500 million saving will come from the gross staff reduction, to which the hon. Member for Isle of Wight (Mr. Turner) referred, or from the 3,200 posts, because the saving sounds rather large for 3,200 posts?

Dawn Primarolo: If I have not got the figure exactly right, I will make sure that it is corrected. The saving will result from the merger's taking out duplication in the departments as the services provided by the Bill are delivered more efficiently and effectively.

Andrew Tyrie: Will the Minister clarify the time frame over which the 500 million will be garnered? When will we see the full benefits?

Dawn Primarolo: The total annual efficiencies and the figure that I have quoted are by 200708; I thought that I made that clear in my initial comments. Savings across the department as it delivers both its public service agreement targets and integration will produce the required savings.
	Turning to the content of the Bill, hon. Members undoubtedly will be pleased to hear that I do not propose to describe the detail of each and every clause todaythat pleasure awaits us in Committeebut I want to take a moment to outline the key measures that the Bill introduces. I confirm that we will table a number of Government amendments later. That is unfortunately inevitable, because those technical amendments involve cross-referencing right across the tax system. However, with the exception of a measure, which is currently being finalised, to provide information gateways for the new prosecutions office, those amendments will be minor or technical drafting amendments; the Bill before hon. Members today is, in essence, complete.
	The Bill establishes HMRC as a non-ministerial department, led by commissioners acting under the general directions of Treasury Ministers. That arm's-length relationship between Ministers and Revenue administration will maintain the existing convention that Ministers do not intervene in individual cases. The Bill transfers the statutory functions of the two existing departments to HMRC, and it provides for the manner in which the commissioners and their officers may exercise those functions. It also provides for the method of financing the costs of running HMRC, and creates a new framework for managing and accounting for the revenues, tax credits and other moneys that the department collects and pays out. That new framework includes measures to enhance parliamentary oversight of HMRC's finances; for example, it enhances existing arrangements for reporting daily revenue flows to the Comptroller and Auditor General.
	The Bill introduces flexibility around the future functions of HMRC, putting it on a level footing with ministerial Departments to allow the transfer of functions into or out of HMRC by Order in Council.

David Heathcoat-Amory: The Paymaster General has just said that important functions could be transferred out. Those important powers could include intelligence gathering, enforcement and criminal prosecutions, and the transfer would simply be agreed by statutory instrument, which, as she knows, are seldom debated and not amendable. Does she think it right that important powers on enforcement and criminal prosecutions should be transferred in that way? Surely the point of the Bill is carefully to circumscribe and limit powers, so that Parliament knows in advance and in primary legislation who will exercise those powers, which should not exercised by Ministers as provided for in this Bill.

Dawn Primarolo: If what the right hon. Gentleman, who was a distinguished Treasury Minister, suggests were true, I would agree with him, but the Bill introduces flexibility without compromising either the integrity of the tax system or the principle that administration of revenues is held at arm's length from Ministers. The transfer from HMRC of taxes, duties, national insurance and tax credits work is not permitted under those arrangements, and the functions are the same as those of other departments. I assure the right hon. Gentleman that the Bill does not provide a gateway for transferring the responsibilities of the department without the proper scrutiny of the House.

David Heathcoat-Amory: The Paymaster General has mentioned tax-gathering powers and tax credits, which will remain in the department, but I have mentioned other powers, such as intelligence gathering, prosecution and enforcement. She has not said whether there is a block on those powers being transferred. It would be different if those powers went from the new department, which will be headed by appointments by the Crown and therefore will be at one remove from Ministers, to Departments headed by individual Ministers. Will she give an assurance on those points?

Dawn Primarolo: I want to be as clear as possible in giving the right hon. Gentleman an assurance on that point. I want to make it clear that all the department's current functions associated with tax and tax credits cannot be transferred under the Bill. The department could collaborate with a devolved Administration or undertake particular workfor example, the collection of student loanson behalf of another department, but that does not include the administration associated with any of its revenue collection or protection duties.
	That leads me on to the department's powers. The Bill is, as I have mentioned, the first step in an incremental process of integration. It does not introduce substantive changes to the administration of regimes, and existing powers for enforcing regimes therefore will be transferred to the new department without any change to the way in which or purposes for which they may be used. The Bill achieves that by ring-fencing powers to prevent their inadvertent extension within HMRC.
	Let me spell out what that means in practice. I think that the right hon. Member for Wells (Mr. Heathcoat-Amory) will recognise this from the time when he was Economic Secretary. It means that a VAT inspector will retain all her current powers in HMRC, with no changes. Similarly, the powers of a corporation tax inspector in HMRC will remain as they currently are in the Inland Revenue. The Bill ensures that the VAT inspector's powers do not become available to the corporation tax inspector, and vice versa. That applies across all HMRC functions. Powers in the new department remain as they currently are in the separate organisations.
	This is, of course, only a temporary position. As the Treasury Committee report acknowledged, delivery of integration in the longer term on the scale that I described is likely to require greater consistency of approach to enable effective working across different taxes and duties. To that end, I can announce today that the Government will issue a consultation document in January that will consider the suitability of the existing range of powers, including the requirement to provide information; interest and surcharge regimes for late payment; penalties for non-compliance and rights of appeal; and the modern regulations and practices that HMRC will need to be a high-performing 21st-century tax administration.
	The Government intend that following that initial consultation and the completion of the Bill's passage, HMRC officials should enter into more detailed discussions with representative bodies. The consultation exercise does not aim to deliver reform in time for the creation of HMRC, but will be the beginning of a thorough review, with the aim of legislating where necessary in the 2006 Finance Bill.
	In the meantime, to aid clarity on and public understanding of the powers available to HMRC for its different functions, an advice note on the powers available to officers of the new department will be published in time for the inception of HMRC. The Inland Revenue and Customs today placed a copy of the draft of that advice note on their internet site, seeking comments. It is also available in the Vote Office and the Library. The departments will also write to key representative customer and tax bodies to invite their comments.
	This considered and incremental timetable for change has been welcomed by key representative taxpayer bodies, as well as by the Treasury Committee. I hope that the House, too, will endorse it.
	The Bill confirms HMRC's authority to pool information internally so that information supplied for one of its functions can be used for any of its other functions. That authority is vital to deliver the joined-up services that the O'Donnell review envisaged and to capture the consequent benefits in service and effectiveness. Again, that has been recognised by key external commentators as a necessary prerequisite for the successful integration of services.
	I stress that HMRC will of course take taxpayer confidentiality every bit as seriously as the predecessor departments; the importance of that was recognised by the Treasury Committee's report. There will be no let-up in HMRC's commitment to safeguarding taxpayer confidentiality.

John Burnett: rose

Dawn Primarolo: If the hon. Gentleman will allow me to finish the passage on confidentiality, I will give way to him then.
	To that end, the Bill introduces a statutory duty for all officers to maintain the confidentiality of information that they acquire in the course of their duties. That replaces the Inland Revenue oath, and for the first time extends it across former Customs and Excise matters, giving statutory backing to existing duties of confidentiality under employment contracts, across a larger range of functions. To reinforce that duty, the Bill provides for a criminal offence of unlawful disclosure of confidential information about an identifiable person by an HMRC officer. That extends the existing provision for Inland Revenue and Customs staff to all functions of the new department. The Bill replaces the existing authority for commissioners in either department to authorise disclosure of information with a much tighter provision that restricts them to authorising disclosures in prescribed, limited circumstances where there is a public interest case for doing so, as defined in regulations. Those regulations will be available for Members to see before the commencement of the Bill's consideration in Committee.
	The Treasury Committee identified the importance of maintaining taxpayer confidentiality where the Treasury and Ministers are concerned. The Government strongly agree with the Committee's view, and I can confirm that confidential information about identified taxpayers will continue to be kept in HMRC and will not be passed to the Treasury or to Ministers.

John Burnett: May I take the Paymaster General back a paragraph or two to the streamlining of powers? Will she give the House the benefit of her initial views about how that will take place, particularly in relation to culture and tone, tax-gathering and co-operation, and policing-type functions?

Dawn Primarolo: We need to consider whether powers are, for example, necessary, appropriate, proportionate, sanctioned by the correct level of authority, have a right of appeal against them, or are sufficient in a changing environment. The Bill and the consultation give us the opportunity comprehensively to consider those issues.
	It will be vital for taxpayersfor all of us as taxpayersto understand exactly what is expected of us and what the sanctions may be if we do not discharge those obligations properly. It is important, in a new department, to try to ensure continuity of powers. This is a huge task, hence the need to consult instead of putting everything in the Bill. Because many of the powers have developed over a long period to deal with specific circumstances, it is much more appropriate that we consider them in the round.

Michael Fallon: The Paymaster General spoke about confidentiality. Although I welcome the clause on that, confidentiality was a matter of concern to the Select Committee. The department's officers currently have to sign a statutory declaration on taking up employment, and I hope that she will reassure us that including the welcome provision in the Bill does not necessarily relieve officers from signing that individual statutory declaration.

Dawn Primarolo: I assure the hon. Gentleman that officers will be required to sign the declaration. When he reads the points that I made, he will remember that I spoke about the employment contract for the new department. We have improved all the protections that currently exist. If the new department can start at the beginning of the next financial yearparliamentary process permittingthe new confidentiality requirements that I have identified will operate. I cannot express too strongly the importance that I personallyand the hon. Gentleman, the Treasury Committee and, I believe, every hon. Memberplace on a clear and unambiguous commitment to protect taxpayer confidentiality with the necessary functions. It is vital for continuing compliance rates that taxpayers provide information to the Revenue departments. The bedrock of that process is the knowledge that their confidentiality is protected. We should guard that at all costs, and I hope that the hon. Gentleman believes that the Bill provides for that.
	The Bill also introduces new arrangements for ensuring the highest possible standards in HMRC in relation to criminal investigations. As my hon. Friend the Economic Secretary announced in September, the Bill extends the remit of Her Majesty's inspectorate of constabulary to provide for it to inspect HMRC's compliance with the requirements of the criminal justice system. It also extends the remit of the Independent Police Complaints Commission, giving it a key role in considering allegations of criminal or gross misconduct by HMRC officers. Those two proposals will implement the recommendation of the Butterfield review that Customs identify how additional external scrutiny can best be introduced into investigation work. Given that the departments are merging, I hope that hon. Members agree that it is right to take the opportunity to ensure that the new department is subject to the highest standards of scrutiny and accountability.
	The Bill provides for obstruction, assault, or impersonation of HMRC officers to become a criminal offence, thereby consolidating existing provisions that relate to the Revenue and Customs. That ensures that officers can perform their functions within the protection of the law and protects the public from the unlikely event of unscrupulous people passing themselves off as officers.
	The Bill aligns the penalties for those offences with their police equivalents, helping to deliver coherence and consistency throughout the criminal justice system. It also restricts the officers who could previously arrest for such Customs offences, so that only officers authorised by the commissioners to exercise the power of arrest for the offences can do that. That tightens arrest arrangements and will remove the power of arrest for the offences from several Customs and Excise officers who currently have it legally but do not need it in their current jobs and are therefore administratively barred from using it.
	The Bill establishes a fully independent prosecutions officethe Revenue and Customs Prosecutions Officeto provide independent scrutiny of criminal cases investigated by HMRC. The creation of that office was a key recommendation of the Butterfield review. The director of the prosecutions office will be accountable to the Attorney-General, ensuring a clear separation of responsibilities from HMRC.

Teddy Taylor: The Paymaster General has spoken for 45 minutes and interested us with many of her comments. Will she refer to the Bill's employment implications at some stage?

Dawn Primarolo: I referred to the employment implications when I identified staff savings of 3,200 by 200708. There was an exchange between several hon. Members and me about that. I went on to demonstrate how that would be achieved in some cases by removing duplication and moving forward on several reforms. I gave the example of the pre-Budget report announcements on the Small Business Service and allowing one tax return for all taxes.

David Laws: I am grateful to the Paymaster General for giving way again so graciously. She is obviously learning from the Chancellor. Will she confirm that the figure of 3,200 is a working assumption, been taken from the example of other mergers, or does it follow detailed work examining specific aspects and estimated savings that might be made?

Dawn Primarolo: Of necessity, it is a working assumption at this stage. The merger, the preparation for it and the commitment to spend public money to begin the process cannot startthe two departments do not have the authority to undertake that workuntil the completion of Second Reading. I have therefore been advised of the figure by the prospective chairman and management of the new department. I know that hon. Members will keenly follow the implications. However, hon. Members have also pressed me on many occasions over the years to remove duplication, simplify the system and allow one contact point whenever possible for information for a taxpayerI gave the example of a taxpayer's having to give the same information to several different components of the existing department. When we achieve that, we will be more effective, but it is inevitable that fewer staff will be required.
	Let me revert to the fully independent prosecutions office. As I said, the director will be accountable to the Attorney-General, thus ensuring a clear separation of responsibilities. The creation of such an office is an important contribution towards maintaining public confidence in the criminal justice system, because it ensures the independence of the prosecutor from the investigator in cases that require criminal proceedings.
	That independence matters because it ensures that the prosecutor can conduct a fully impartial assessment of the merits of a case before it reaches the courts. Independence does not, of course, mean distance. HMRC and the new office will work closely together to ensure that the prosecutor's expert and independent advice can be called on to provide guidance on the requirements of the criminal justice system at all times.
	This constructive approach to prosecutions, with clearly defined and distinct roles for the investigator and prosecutor, will ensure that the quality of criminal justice work undertaken in HMRC and by the new office is of the highest possible standard.

Kelvin Hopkins: Will the new arrangements make it easier or more difficult to sustain convictions? While billions of pounds are being evaded or avoided each year, it is important to ensure that the system is able to sustain convictions and that the Exchequer receives the maximum possible benefit from them.

Dawn Primarolo: My hon. Friend is absolutely correct. It is vital to ensure that a case has all the information and evidence required to secure a prosecution. These recommendations arose from the Butterfield report, which was commissioned by my hon. Friend the Economic Secretary, and will ensure that investigations will be able to benefit from the expert advice of the prosecution service, which will then take a decision on whether the evidence supplied by the department would secure a prosecution. It is also important that we set a high standard for operations in this area, in order to maintain confidence and to ensure that the tax system works as it should.

John Burnett: Will the right hon. Lady give way?

Dawn Primarolo: I have given away many times, but I shall give way once more. I realise, however, that I must be testing the House's patience by speaking for so long.

John Burnett: I do not think so: many of us are extremely interested in what the Paymaster General has to say. I have been bellyaching for years about taking the Inland Revenue prosecution service and the Customs prosecution service and putting them under the aegis of the Attorney-General, and I very much welcome this provision. As she knows, the Butterfield report related to a Customs case, and things have not been too happy in that prosecution service for some time. I should like to know the answer to one or two questions that might superficially sound mundane but are not. Will staff regularly transfer from the Inland Revenue to the prosecution service; and will the prosecution service be housed away from the Inland Revenue premises?

Dawn Primarolo: With regard to the staff, the necessary expertise currently in the two departments will transfer to the prosecution service. As the Bill states, the appointment of staff will be a matter for the director. I do not know exactly which office block the service will eventually be housed in, although I am sure that we can find out before we reach the winding-up speeches. From memory, I think that it will be in separate accommodation, but I do not want to mislead the House on that. I honestly cannot remember, but I will ensure that the hon. Gentleman has a reply to that question before we conclude our debate today.
	The Bill establishes the office under a director, who will carry out his functions under the superintendence of the Attorney-General. I think that that will be widely welcomed. The director may designate appropriate members of his staff as prosecutors, who will enjoy the rights and responsibilities necessary to enable them to conduct prosecutions on his behalf. All staff of the office, including prosecutors, will be subject to the director's instructions.
	Confidentiality remains as important an issue in the prosecutions office as it is in HMRC. The Bill therefore places a duty of confidentiality on RCPO staff, and backs this up with a criminal sanction for unlawful disclosure of information. The prosecutions office will operate to the highest possible professional standards. In order to provide independent assurance of those standards, the Bill provides for the office to be inspected by the Crown Prosecution Service inspectorate, and in a reflection of this focus on standards, the Bill sets out clear minimum requirements for qualifications, which all RCPO prosecutors must satisfy in order to be appointed to the role.
	The Bill is modest, although the task that it sets in train is not, as it will involve a very substantial programme of reform and change, which will deliver incremental improvements to services over the coming years. A key challenge for HMRC management throughout the integration process will be to ensure ongoing, consistently high standards of service to taxpayers, and to ensure that the delivery of business as usual is not compromised. Indeed, this very point was identified as a risk in the Treasury Committee's report, and we are very alive to it. The House and the Treasury Committee will be pleased to hear that it is a challenge that HMRC management are absolutely committed to meeting, as am I.
	The O'Donnell review acknowledged the importance of strong leadership in managing the transition process, and I am confident that the management team led by David Varney will maintain an absolute focus on business results alongside the delivery of the new departmental structures and processes. I have equal confidence in Inland Revenue and Customs staff, who have delivered, and continue to deliver, high standards of professional service in their respective departments.
	We can trace a nationally organised customs service back over 800 years, to the time of King John. In 1671, King Charles II put the service into the hands of commissioners. In fact, anyone who visits Customs headquarters can see the swords that have been blunted, once usedI do not know what foras a testament to the long history of the department. Direct taxes, in the sense of a contribution from the local community to royal expenses, are also ancient, but the modern national administration is much the younger of the two departments, dating from the introduction of income tax in 1842 and the creation of the Board of Inland Revenue in 1849. In all that time, the staff in both departments have served the House and the taxpayers of the United Kingdom to their greatest ability, and their professionalism is beyond question.
	The formation of HMRC will build on the proven track records of people across Customs and the Inland Revenue, to deliver a world-class organisation that is truly fit for the 21st century. The challenge is significant, but so too is the potential for delivering real improvements in the way in which the new department does business. The Bill is a crucial first step towards delivering those improvements, and I commend it to the House.

Andrew Tyrie: I shall carry on more or less from where the Paymaster General left off, although I shall not try to match her symphony of heavenly length. That was partly because she gave way so generously that she had to make such a long speech, but I shall try to make mine in about half that time. I should like to thank her for inviting me, my hon. Friend the Member for Rayleigh (Mr. Francois) and the Liberal spokesman, the hon. Member for Yeovil (Mr. Laws), to the Treasury to discuss the Bill. We found that briefing very helpful.
	I really will carry on from where the right hon. Lady left off in one particular regard. She talked about the culture of the departments. The Revenue departments come in for a lot of criticism, both from individuals and businessesand sometimes from meparticularly when they fail to use common sense and end up making my constituents' lives a misery. Customs, in particular, has come in for a rough ride in recent years.
	At the outset, however, I want to say that we are lucky in this country with our Revenue departments. In many ways, they are the salt of the earth. They probably provide the least corrupt revenue service of any major country in the world, and are assiduous in protecting the Revenue. Above all, they have a sense of collective loyalty and duty that only the best organisations can hope to nurture.
	Some might think that I say all that because I might be sitting on the other side of the House shortly, so it would be handy for the early part of my tenure to have said it. As it happens, I say it because I believe it, having worked closely with both departments in the 1980s. I would like any criticisms and reservations that I and my party might express about the departments in the weeks ahead, as we consider the Bill, to be put in the context of those remarks.

Kelvin Hopkins: I agree strongly with the hon. Gentleman's remarks, but does he agree that sometimes when the Revenue and Customs and Excise come in for flak, it is because of the bad legislation that they have to implement, or the absence of clear rules, particularly on the importing of alcohol and tobacco from the continent of Europe, on which we never quite know where we stand?

Andrew Tyrie: I shall not get drawn on the alcohol and tobacco point, but I agree with the hon. Gentleman's comment that a high proportion of the problems of Government departments are caused by politicians getting in the way and trying to run things, rather than getting out of the way and reducing the size of departments to enable the rest of the country to get on with their jobs.
	The Opposition will not force a Division on this issue tonight. Our primary concern is not that, in principle, there are no benefits to be had from merger, but that in practice, we are not yet convinced that the Government have thought through fully how to capture the benefits of merger, or even tried to measure them much.
	Although we have had the O'Donnell report, a regulatory impact assessment, a Bill and its explanatory notes, rafts of evidence to the Treasury Committee and much else, we have not yet obtained clear thinking from the Government on why we are merging these departments. The nearest that I have found to a clear summary for the reasons for merger is in Gus O'Donnell's March reporta very long report, which I have hereparticularly in paragraphs 1.18 and 3.41. It would be far too tedious to read it all out, but I shall try to provide a summary, which I think the Paymaster-General will agree is connected to what she said earlier.
	Mr. O'Donnell says that there are four benefits of a merger: first,
	more complete information and analysis to improve risk management across the tax system;
	secondly,
	better and more flexible use of resources;
	thirdly,
	a more focused approach to compliance across the tax system;
	and fourthly, better deterrence through increased
	compliance allowing greater targeting of the non-compliant.
	I was not much the wiser having read that.
	In a speech only a few weeks ago, Gus O'Donnell had a go at his predecessor, Lord Bridges: he read out a passage of Lord Bridges's prose, which he described as something of which Sir Humphrey Appleby would be proud. I think that I have worked out what Gus O'Donnell meant in his passage. Great man though he is, he seems to have fallen into a similar mandarin trap.
	Much more worrying, however, is the lack of clarity in some of these documents about why the departments are being merged, which may conceal a lack of a sense of purpose in doing it. My concern is not just that it is not explained, but that those who are doing it may not be clear in their minds about why they are doing it.
	I sat down and tried to work out what tests we should use to measure whether a merger would be a success. Those can be much more simply stated than anything that I have seen in these documents. If the Paymaster General disagrees with what I say, I shall give way to her, and if I miss out a major item I am sure that she will be able to leap in.
	The primary task of a revenue department is to get the money in. Therefore, task No. 1 is to protect the yield. Will this merger get more money in with fewer mistakes? If so, how much? That is the first issue that needs to be measured.
	The second objective must be to reduce the hassle for millions of individuals, and hundreds and thousands of businesses throughout the countrythe so-called compliance burden. Will that go up or down with this merger? The Paymaster General implied that it would go down. If so, by how much? What is her estimate?
	Two consequential questions flow from those two simple ones, and they also need answering. Are we confident enough about the possible gains in extra yield and better compliance to be able to justify what everybody agrees would be transitional costs? I refer not only to the 75 million in the explanatory notes but to the enormous disruption that will take placethe Paymaster General implied at the end of her remarks that the merger was a Herculean task, with which I agree, and that will also impose a substantial transitional cost. Are we confident that the extra gains in yield and compliance are greater than those transitional costs?
	Finallythis relates to a point that I made at the beginningwe need to have in mind a long-run strategic objective. Even if the benefits outweigh the costs, are we confident that we can achieve that without a decline in the high standards that Revenue departments have set themselves, including their duty of confidentiality? Will the morale of the departments suffer in the long run? In particular, we must bear in mind that both departments, particularly Customs, face major criminal efforts at evasion.
	I have set out my four tests for attempting to measure the success of a merger. I agree that other considerations may be relevant, but the Paymaster General has not leapt to her feet to suggest that anything that I have said is mistaken or that I have missed out something substantial.
	Let us try to move forward. As we now have some intelligible yardsticks, how does the merger measure up to them? The first port of call should be the regulatory impact assessment, a relatively thin document for such an important issue. I can find in it no overall estimate of the effects on the yield. Virtually the whole of the economic costs and benefits are dealt with in five very short paragraphs. On efficiency savings, we are told that there will be 13,000 staff savings, but when we consider that carefully, and as the Paymaster General clarified earlier, more than 9,000 of those will come anyway under the Gershon review, even without the merger, and only 3,0003,200 now, I thinkas a result of integration. Incidentally, those figures have moved around a bit as they have been examined.
	The Treasury Committee did a very good job generally on this subject. It is sensible, particularly with regard to subjects that are not absolutely urgent and immediate, that debate should take place on the basis of thorough scrutiny by Select Committees. The Treasury Committee also did a good job on this specific point, and I commend the hon. Member for Warwick and Leamington (Mr. Plaskitt), who is in his place, and the hon. Member for Bassetlaw (John Mann), who showed in questions in Committee just how much the numbers on potential savings had moved around.
	We have arrived at the point of agreement that the Government are saying that staff savings directly from the merger will be about 3,200just over 3 per cent. of the total work force. That is scarcely the sort of number that could justify what amounts to one of the biggest mergers in Whitehall, or indeed between any two organisations. No private sector institutions would go through all the administrative hell and business risk of a merger to secure 3 per cent. staff savings, but if we take the regulatory impact assessment at face value, that is what the Government appear to be saying as to why we should support the Bill.
	At least, that was the position in all the documentation until today. Today, the Paymaster General came up with a variation: she told us that the total merger savings amount to 500 million. I should be grateful if she could tell us whether that 500 million is directly connected to the 3,000 staff saving, or whether it is also connected to the further savings that will result from the Gershon review.

Dawn Primarolo: I do not want to try the patience of the House. I was clear about the Department's efficiency savings, and my hon. Friend the Economic Secretary will deal with the hon. Gentleman's points in his winding-up speech.

Andrew Tyrie: I hope he does.

David Laws: Is the hon. Gentleman concerned about the lack of clarity on a point as important as whether the savings relate to the total Gershon staff savings or the merger? In his answer to the Chairman of the Treasury Sub-Committee, David Varney said:
	We have a series of targets over the 2004 settlement, where we have got to produce efficiencies of 507 million cumulatively and save 12,500 jobs net.
	Does that not suggest that the figures cited by the Paymaster General relate to the total staff savings, not the merger?

Andrew Tyrie: That is a good point. I think that that is what we shall find, but we shall have to wait until the winding-up speech for clarification.
	If the savings are based on the combined value of the 3,000 from the merger directly and the 9,000-odd from the Gershon review, we are talking about confusion between two quite different things. The merger is not necessary for the Gershon savings, so the 500 million does not represent savings from the merger. Only a small fraction of that amount should be attributed to it. I hope that issue will be clarified later, but it illustrates a point that I was trying to make at the beginning. The true costs and benefits, and why we are going about the merger now, are not clear in the documentation before us.
	The most important single question in the case of any Revenue department is What will happen to the yield? I can find no answer to that anywhere, but my best guess is Not very much. That is why, although paragraph 3.43 of the O'Donnell report refers to the tax gapwhich is another way of talking about the same thing: the difference between the amount that should be collected and the amount that is collectedthere is no estimate of what will happen to it as a result of the merger. I think that that should have been addressed in some of the documentation.
	While we are on the subject of staff, I want to refer to the slightly broader issue of relocation. I should be interested to know how many staff will be relocated out of London as a consequence of the Gershon review. I note that the Lyons review proposed the relocation of 500 from Customs and Excise and 1,450 from the Revenueabout 2,000 in all. How many extra jobs, if any, will be relocated as a specific consequence of the merger?
	I hope that the Paymaster General and the Economic Secretary will forgive a hint of scepticism from the Conservatives about the relocation issue. After all, is it not the case that far the biggest relocation so far is that of 1,575 staff who have moved from the Inland Revenue office of Somerset house in the Strand to the Treasury building in Whitehall? I do not think that that is the kind of relocation initiative that the Chancellor wanted us to have in mind when he announcedI will not try to reproduce his blathering rant
	I am publishing department by department plans to relocate civil service jobs out of the south east.
	A move from the Strand to Whitehall does not quite match that.

Michael Fallon: I hope my hon. Friend has observed from the Treasury's own efficiency technical note that the Chancellor proposes to relocate only 11.5 of the 1,000 people he employs in his own Department to Norwich.

Andrew Tyrie: I was not aware of the 11.5 full-time equivalent jobs going to Norwich, but that makes my point.
	Let me return to the broader theme. The first of the two tests that I mentioned at the beginning was that of getting the money in. We have virtually nothing from the Government to help us to assess the merger. What about the compliance-burden test? That is covered at length in the O'Donnell report, which points out that companies may obtain benefits from being able to engage with only one Department to fulfil their requirements for all their taxes. Here again, however, I have not been able to spot any figures, I suspect because most of the gainsalthough possibly there in the long runare extremely difficult to capture. That is because the Inland Revenue and Customs have fundamentally different sets of skills as organisations, and are trying to collect two completely different types of taxwhich is why the merger did not take place decades ago.
	The Inland Revenue deals with organisations retrospectively. It is trying to capture income flows on which there is usually a great deal of ready documentation. Its approach is analytical. Customs, on the other hand, is dealing with transaction taxes. Its role is, of necessity, partly forensicquasi-legal. It needs to capture the transaction as it happens. That is why it may not be easy for the new department to deliver the compliance gains that we should like for its customers. There is also a real danger that each organisation might find its skill sets diluted, to the benefit of neither. Of course there is the opportunity to get the best out of both skill sets, but that is easier said than done. It is a big undertaking. I think it will be particularly difficult to achieve in the next year or two, because both departments already have their hands full.
	The Inland Revenue is grappling with the task of transforming itself from a revenue collection service into a very different institution: a tax and benefits agency. As we know, it has already been a bumpy ride. Customs has its own problems. It is about to install a massive information technology system, and we know the Government's history on those. I shall return to that subject later.
	Explanation and justification of both those crucial issuesthe effect on the yield and complianceis pretty thin. To its great credit, the Treasury Select Committee has tried to elicit some by asking questions about long-term savings, but that has not helped us to obtain a better regulatory impact assessment. When David Varney was questioned by the Treasury Committee on the gains of merger, he said that it was impossible to answer without knowing the details of the sequencingthe timetable. The Government must have done the work required to establish that by now. Will the Paymaster General give us a quantitative analysis of the costs and benefits?
	I have tried to describe how to assess whether the merger is really worth it by providing some basic yardsticks. We will of course have a couple of days in which to examine the Bill in detail in Committee, but a number of points should at least be alluded to now.
	First and most important, the Minister has been at pains to stressit is stressed in the documentsthat this is a minimalist Bill. The Paymaster General has told us that, and the regulatory impact assessment assures us of it. The regulatory impact assessment tells us of two other possibilities that the Government rejected: a more comprehensive early Bill that would make substantive changes in relation to powers, and a fully comprehensive Bill in a later legislative Session. However, I am a little worriedwe will explore this issue in Committeethat the Bill might have included provisions that fall into the category of a comprehensive Bill. I noted carefully that the Paymaster General sought to provide reassurance about powers of arrest, but an initial reading of clause 29 does not give me that reassurance. It appears to extend the power of arrest to new HMRC officers.
	I was very grateful to the Paymaster General for making it clear that she will publish proposals on the powers in January; we will of course develop the proposals when we are in government. It is important that this issuethe one to which many pressure groups will pay the most assiduous attentionbe given a full airing, and I am pleased that there will be a consultative document as early as January. The advice note on powers has only just been published, so I was unable to read it before today's debate, but I shall read it carefully as soon as I can.
	Another significant issue, which the Paymaster General hardly touched on, is policy formulation. My best guess is that the lion's share of the 1,500 people who are moving from the Strand all the way to the Treasury will be doing policy work. In justifying the new policy arrangements, Mr. O'Donnell has sought to distinguish between strategic policy and policy maintenance. I have thought quite a bit about this distinction. Is it really helpful? Perhaps it is in theory, but I am not sure that it will be in practice. The current arrangements work reasonably well. I could not help feeling that the ghost of Sir Humphreyor perhaps I should say Lord Bridgeswas lurking in Mr. O'Donnell's lengthy description of the distinction between strategic policy and policy maintenance.

David Laws: Does the hon. Gentleman believe that we have good reason to be confident about the origination of tax policy in the Treasury in recent years? Can he cite any evidence to suggest that it has been doing a good job in developing tax policy in that time by, for example, simplifying the tax system?

Andrew Tyrie: As I have said, it is the politicians, not the officials, who should be blamed. Tax policy can be dramatically improved and the tax system dramatically reformed if politicians have the will to do so. The system has become far more complicated and it has set the economy back some way in the medium and long term. Eventually, it will have a corrosive and sclerotic influence on the economy's performance. I do not want to blame Treasury officials; rather, I put the blame fairly and squarely at Ministers' door. In many cases, these often distributional reforms have been pushed through with the best of intentions, but in the long run they are likely to have the opposite effect to the intended one. If one presses the right buttons in respect of the officials, one gets the right results. I am sure that the new arrangements can be made to worka way will be found to make them workbut I am simply trying to point out that I am not absolutely sure that this apparently major reshuffle will make much difference to the overall quality of policy work.
	There are a few more issues that I want to touch on, and which we shall discuss in more detail in Committee. The first is information sharing and confidentiality, to which the Paymaster General referred. Clause 16 and schedule 2 enable the use of information acquired by the Revenue and Customs in connection with a function for any other function. Before integration, information could be passed between the Revenue and Customs only through statutory gateways. As I understand it, the Bill will enable the new department to pool all its information, irrespective of the purpose for which it was originally obtained. That issue could also be of concern, and we need to examine it carefully in Committee.

Kelvin Hopkins: If this provision makes it easier to collect the revenue that the country so clearly needs, is it not a good thing?

Andrew Tyrie: The hon. Gentleman is right: that is why the gateways were created in the first place. The question is, are we confident that relaxing them is either necessary or desirable? As I said at the outset, if it can be shown that relaxing the gateways could increase yield, such a provision might be worth considering carefully, but it must be balanced against the consequential risk to confidentiality.
	It is vital that nothing in the Bill threatens taxpayer confidentiality. If people do not have confidence in the Revenue department, they will not share information and the tax yield will suffer. According to clause 19, information can be disclosed in the public interest, but the explanatory notes provide little clarification. I should be grateful for an explanation of the meaning behind this apparent widening of the disclosure provisions.
	On reading the O'Donnell review, I was also somewhat apprehensive at discovering that the new Bill provides
	an opportunity to consider gateways with other departments, such as DWP.
	I should be grateful if the Paymaster General would tell us to what extent the opening of gateways to other Departments has been considered and what decision has been arrived at.
	I am surprised and disappointed by the Government's decision to abolish the oath that officers are expected to take and to read out in front of a witnessit is properly known as the statutory declarationthereby impressing on them their duty of confidentiality. The Law Society told the Treasury Committee that there would be advantages in restating the Inland Revenue oath in legislation, so that it is made clear that officials keep taxpayers' information confidential. I agree, and I am really perplexed by the Government's decision to abolish it. It is used in courts for witnesses, and we swear the Oath of Allegiance before we can take our seats in the House. The oath has previously been the subject of much controversy, but many hon. Members feel that it should be used even for witnesses who appear before Select Committees, particularly during major investigations; in other words, they feel that the use of the oath should be extended. Keeping the oath of confidentiality would certainly do no harm, and might even do some good. I find it difficult to justify its removal.

John Burnett: I thought that the Paymaster General said earlier that the oath would appear in contracts of employment.

Dawn Primarolo: indicated assent.

John Burnett: Does the hon. Gentleman think that sufficient, in addition to the Bill's provisions on confidentiality?

Andrew Tyrie: I shall listen very carefully to what the Government have to say on this issue, but I am inclined to say no, I do not think it sufficient. I want to stay on the road that we are currently on, which is keeping the oath. In fact, we should extend the Revenue oath to all members of the new department. However, let us discuss this issue in Committee.
	Let me say a brief work on IT systems. Although not the most crucial questions, two important ones are: to what extent can these systems be merged, bearing in mind the different needs of the two departments; and what savings are to be made from such a merger? As David Varney said in giving evidence to the Select Committee, the new department will have 250 major IT systems and 3,000 staff working them. It will
	put out 170 million forms a year and run 100,000 desktop computers.
	I was not at all surprised to see that, in its report, the National Audit Office told Customs that contingency plans were needed to deal with the O'Donnell review. Are the Government prepared to put into the public domain the necessary information to reassure us that contingency planning has indeed been conducted? Do the Government have a contingency plan for weaknesses in IT that they could publish, and can we please have it before we consider the Bill in Committee? I hope that the Government do not think that I am wasting officials' time by asking Whitehall to produce a document or amend an existing document before January.
	IT systems are never easy, but the truth is that the Government's record on them does not inspire confidence. My hon. Friend the Member for Rayleigh (Mr. Francois) will discuss it in greater detail later, but let me give a few brief examples. The Child Support Agency's computer system, which cost nearly 500 million, recently failed and staff at the Department for Work and Pensions were unable recently to process new benefits and pension claims for several days because the system went down. The computer systems of the Passport Service, the Criminal Records Bureau and National Air Traffic Services have also had problems. And so we go on.

Ivan Henderson: We inherited those problems.

Andrew Tyrie: Actually, what the hon. Gentleman says from a sedentary position is not true. I checked every one of those before I mentioned them and they have all been substantially altered or completely renewed under the present Government.
	I would like to say a few words about the law enforcement provisions. I support in principle the creation of a new prosecuting authority, but we need to look carefully at the detail in Committee. That new authority is, in its way, the single most important direct, clear and visible change made as a consequence of the merger. Outsiders will see it and it is extremely important that we get it right. Rather than go into detail nowI notice that I have been going on for more than half an hourlet us leave that for examination in Committee.
	I want to make a general point before concluding. Many business people say that when they deal with the Inland Revenue at its best, they are having a conversation with someone who is thinking carefully about the needs of the business as well as a narrow calculation of the yield. Both parties know that accounting practice can vary and that recourse to the law will probably not help very much. The idea that they should always pay exactly the correct amount of tax in any one year needs to be taken in the light of the fact that accounting practices vary and companies' decisions can alter liability in any particular year. The Revenue knows that most companies do not want to break the law and do not want to find themselves on the wrong side of the Revenue, so a modus vivendi delivers the yield.
	We should compare that with Customs. As the Paymaster General said, anyone who walks into its headquartersI have not done so for a few years, but my opportunity will come shortlyis confronted with a wall laden with cutlasses. That shows that its history and approach are closer to that of a police force than a revenue service. The Revenue has had many decades of dealing with reluctant but honest men and women. Customs has had rather more experience of chasing dishonest men and women. It is still chasing smugglers and other highly organised criminals who seek to evade the excise. I spoke earlier about the blending of cultures and it is crucial that we pick up the best of each. In many ways, that means the Revenue showing Customs what can be achieved on the basis of its culture, whereby dealing with basically honest but often busy business men brings about more co-operation and yields more tax.
	This has been a long speechprobably longer than I thought it would take to deliver, but still a good deal shorter than that of the Paymaster General.

Dawn Primarolo: I gave way a lot.

Andrew Tyrie: I agree. I am sure that the right hon. Lady is pleased that I also gave way a good few times.
	The merger of the two Departments was first described by a royal commission in 1887 as an old question, and a Select Committee had looked into the matter 15 years before that. Gladstone was first against it and then, as with so many issueshome rule, the great Reform Act, extension of the franchiseeventually in favour of it. It took him about 20 years to change his mind about the merger of the Departments, but this Government have stood on their heads in a mere four years.
	The Government's response to the Select Committee's first report on the matter in 2000 said that they believed that the synergies
	can be achieved without the risks, upfront and opportunity costs and structural upheaval which merger would inevitably entail . . . Thus, while the Government accepts that merger might bring some of the benefits outlined by the Committee, it believes that they can be achieved without the disbenefits of merger through a dynamic and focused programme of closer working.
	That is official jargon for saying that it is not worth the candle. Four years later, we are told that it is worth the candle. Why the volte-face? I hope that it is because the Government have done a good deal of backroom work, which they have not yet published, and that they will shortly show us that the real benefits of the Bill relate to protection of the yield and reduced compliance. I hope that they will be able to add some numbers and some substance to their claims and be able to quantify the so-called synergies in order to produce a sensible estimate of the full benefits of the merger.
	I hope so, but I fear not. I fear that the Government have not been feeding on the pure milk of administrative common sense, but have taken a dose of raw politics. They have sharply increased the size of the civil service. In the Revenue departments alone, the number of civil servants has increased by more than a third in seven years, from 73,000 to almost 100,000. The publicthe Labour party's focus groups will have told them thismade it clear that they did not believe that they were getting value for money, and they were probably right. So the Chancellor had his Gershon review, and subsequently put the whole recruitment drive for the civil service sharply into reverse. But he could hardly go around telling other Departments to put their recruitment into reverse without having a look at his own. I believe that that matter explains, at least partly, the timing of the Bill.
	There may be some benefits from the merger, but they are not necessarily great. The two Departments have developed different styles and different cultures for very good reasons. As a result, capturing the benefits will take a long time and will not be easy. There are attendant costs and risks. Conservative Members will not oppose the Bill, but we would like to see much more evidence that the Government have carefully thought through what they are trying to achieve with the Bill and what their ultimate objectives are. We would also like to see more evidence that the Government know how to accomplish them, but we have not heard much evidence today.

Nigel Beard: The merger of Customs and Excise with the Inland Revenue was proposed by the previous Treasury Committee and has been welcomed by the current one. On the face of it, as the hon. Member for Chichester (Mr. Tyrie) touched on, it is a peculiar coupling. Customs and Excise has an image of speed boats and James Bond activity in remote inlets of the coast, whereas the Inland Revenue has the Bob Cratchit quill-pen image of someone at home in a dusty office with ledgers. That is not how it seems to many business people, who deal with one set of people to pay VAT and another set to pay company and income tax.
	Bringing those two cultures together with compatible IT systems will ostensibly lead to savings, as already mentioned, but realising the potential benefits that are pointed out in the O'Donnell report needs managingindeed, a degree of management that has not always been apparent in the past. That said, we must not lose sight of the wood for the trees. The dominant and primary objective of this merger is not cost saving in organisation: the overriding aim must be to reduce the gap between the potential revenue to the Government from tax and what is realised. That tax gap is too large.
	The touchstone of success of this merger is not some recondite measure of administrative efficiencyit is the reduction, virtually to elimination if possible, of tax evasion. The amount of tax currently not paid by those who should pay VAT or company tax or income tax would make a significant contribution to the national accounts. At the same time, we must foresee and minimize the impact of new tax policy on the competitiveness of businesses.
	In that context, I welcome the proposal for retaining an ability to assess the business impact of tax proposals within the new organisation, while at the same time strengthening the Treasury's ability to assess the overall effect of tax policy. If there are to be adverse effects of new taxes, at least we should expect that they were known about and weighed against the benefits of the tax. Normally, we should expect that adverse effects are anticipated, and eliminated as much as possible.
	Above all, we must avoid the costs that honest organisations face in complying with tax law. I know very well that the CBI goes on and on, boringly, on the subject, as though all tax were an unnecessary imposition, and Digby certainly does moan an awful lotbut he is not always wrong.
	There is no real reason why the basis for calculating income tax, for example, should be slightly different from the basis for calculating national insurance contributions and so involve a different set of calculations. More generally, the accounting needed for tax purposes could be brought nearer to the principles involved in normal company accounts. I hope that the new tax policy unit will home in on such issues.
	A great gain for many businesses will be that they will have to deal with one inspector only for VAT, company tax and income tax. However, the primary measure of success of this reform will be the reduction of tax evasion, and the record is not good in either detection or prosecution.
	The case of the London bonded warehouse was a scandal that could be presented theatrically as a farce. Duty-free spirits were donated to the back doors of public houses throughout south-east England on a grand scale. They left the bonded warehouse heading for the continent, and so no duty was paid on them. However, they had a regular habit of turning round at the sight of the channel and returning to London. Once that was spotted, an exercise was established for acquiring the evidence needed for prosecution. The Exchequer lost the unbelievable sum of 670 million just in the process of gathering the evidence.
	Then there was the case of Regina v. Doran, a large-scale drug dealer. He was caught redhanded in possession of a huge haul of class A drugs. Someone had to try really hard to allow him to avoid due punishment, but the case failed because of a legal mix-up in mounting the prosecution. After those two cases, the Roques report looked into the management and administration of Customs and Excise, and the Butterfield report analysed whether Customs and Excise should have its powers to mount independent prosecutions taken away.
	The Treasury Sub-Committee was assured that the findings of those two inquiries had now been acted upon. That is no doubt true, but I should like an assurance from the new chairman, Mr. Varney, that he is personally satisfied that these events could not be repeated in the new organisation. The Sub-Committee was not reassured when the previous Customs and Excise chairman was asked for an assurance that staff vetting procedures were such that no one with a criminal record could be employed in Customs and Excise. The answer was no, he could not give us that assurance.
	Likewise, action against cigarette smuggling is not reassuring. A few years ago, no duty was paid on one in four cigarettes sold in Britain. That 25 per cent. has been brought down to 18 per cent. but many cigarettes are still being smuggled, at a cost to the Exchequer of around 2.5 billion per annum.
	The cigarettes in question were not made of mud and brick dust in a shanty town. They were made by three major UK companiesBritish American Tobacco, Gallahers and Imperial Tobacco Ltd, with the Government health warning printed on the side of packets. The total estimate of smuggled cigarettes in 200203 was about 12 billion, out of a total consumption of 75 billion. With duty avoided on that scale, I cannot believe that no one in those major companies knew what was going on.
	At a recent meeting of the Treasury Sub-Committee, we were told that progress had been made and that the companies involved had signed a memorandum of understanding to co-operate in reducing cigarette smuggling. So three major companies have decided that they are willing to co-operate in enforcing the law of the land, but that leaves rather up in the air the question of what went on before the memorandum. No doubt all will be revealed in due course.
	Mr. O'Donnell, the permanent under-secretary to the Treasury, said when he was commending this reorganisation that
	you need an organisation which is capable of managing different cultures within itself. For honest taxpayers you want a culture that is customer friendly. For dishonest taxpayers and, where there is fraud going on, you need a very tough, ruthless approach.
	I agree entirely that that is a good principle of operation, but we seem to have seen too little of the tough and ruthless approach. If anything, the approach seems to have been lackadaisical and benignly indulgent. The great fallacy would be to assume that, because we are setting up a new organisation, all the observations in the Roques and Butterfield reports would be complied with immediately. They will not be, unless there is a clear determination, and a management ethos, to crack down on the cheats and frauds mercilessly.
	The message that I should like to see go out from this debate to Mr. Varney, the chairman, and to his management team is that he should stick to the customer friendly approach for the honest taxpayer, but use every power available against the dishonest ones. If he does not have enough powers, he should come back and ask for more.
	There is a heavy dependence on management to put right the inadequacies that I have outlined. Legislation is not enough. The management arrangements of the Inland Revenue, as evidence to the Treasury Sub-Committee has shown, do not lead to unqualified confidence. The sale of all the Inland Revenue's properties on lease-back to a company registered in a tax haven did not imply a management with a highly developed sense of the ridiculous. Nor was a sense of worldliness obvious when a so-called comfort letter was given to the buyer that breached Treasury directives that apply to every Government Department. The then head of the Inland Revenue was not told about it, and neither was the Minister.
	The Treasury Sub-Committee has welcomed the steps taken to tighten management in the new organisation. We have supported the introduction of a framework document setting out who is accountable to whom, and for what. We also welcome the proposal for my right hon. Friend the Chancellor to issue an annual remit to the executive chairman outlining the organisation's new and continuing tasks. However, the proposal for the executive chairman to report to three different Ministers on different aspects of the organisation is a formula for confusion, delay and blurred accountability. It is important that the new organisation hits the ground running and puts the past behind it. A first year with management distracted by a flurry of memos around Treasury departments and fruitless co-ordination meetings will not achieve that. I hope that the Sub-Committee's recommendation that this arrangement should be looked at again will be acted on, not when the confusion has happened but without delay.
	This Bill is a good basic framework that recognises the inadequacies that have arisen in the past in both Customs and Excise and the Inland Revenue. However, it must not be seen as a ritual incantation that in itself will provide a revenue and customs service relevant to the 21st century. It needs complementing by a highly motivated staff, who are managed to make full use of their abilities, directed to achieve clear objectives and provided with investment in technology. All that is vital to them ensuring that the taxation that this House votes for is fairly levied on everyone who has a lawful duty to pay. I am sure that the good wishes of this House go out to all who will be involved in an endeavour that is so fundamental to the life of this country. They will not be thanked by their customers: let us thank them in anticipation of their services.

David Laws: I join the hon. Member for Chichester (Mr. Tyrie) in thanking the Paymaster General and the Economic Secretary for the briefing that they gave us a week or so ago. In particular, I thank the Paymaster General for returning to me an item of clothing that I left in her office at the end of our discussion. [Hon. Members: Oh!] I should clarify that it was a coat. Her generosity in bringing it back to the House was welcome, especially as it was a cold day.
	I also join the hon. Gentleman in broadly welcoming the Bill. We share the view of Martin Taylor who, in the evidence that he gave to Gus O'Donnell's report, which was produced in March, said that the separation of tax-gathering departments is anomalous in a modern economy. That is an accurate assessment of the position and I pay tribute to those bodies, such as the Treasury Committee, whose Chairman and other members have been in their places today, for their work in drawing attention to the potential benefits of merger. I am especially pleased that they have indicated that they will continue to track the progress of this merger over the next few years, because that will be important.
	We share many of the detailed concerns that the hon. Gentleman outlined and I shall set out some of those in a minute. I am also pleased that the hon. Member for Bexleyheath and Crayford (Mr. Beard), who is also a member of the Treasury Committee, emphasised in his contribution the importance of addressing the tax gap through the merger of the two departments. The Paymaster General gave a long, detailed and helpful speech, but the one area on which she was a little light was an emphasis on how, over time, the merger will seek to address that important issue. I am glad that the hon. Gentleman put it at the centre of what the Government strategy should be.
	Although I started by saying that we broadly welcome the Bill, we also share the concerns expressed by the hon. Member for Chichester (Mr. Tyrie) and by many of the professional bodies about how the merger will work in practice, and we share Martin Taylor's viewset out in his submission to Gus O'Donnellthat the change will be risky, perhaps very risky. We also share the view of the Law Society that major gains could be made from the merger if it is conducted well. The devil will be in the detail and the delivery of the changes. If the Government and those people responsible for delivering and implementing the merger get the detail and the delivery wrong, what could be a triumphin the Government's mindcould turn into a disaster. It is the risks on which I shall concentrate, bearing in mind that the Bill is essentially a modest mechanism to get the merger up and running, leaving some of the important decisions about powers for consultation and implementation to a later date.
	I shall start by setting out the points of agreement with the Government. The first is that although there are many areas in the Inland Revenue and Customs and Excise with no obvious overlap in responsibilities, we can see the potential for cost savings within the new department and in compliance for businesses. We also believe that there is a potential for improving action against tax evasion and avoidance. In our view, and as the Treasury Committee concludedthe Government appear to agreethose gains are more likely to be secured by a merged department than by keeping the two departments separate and trying to institute measures to ensure co-operation between the departments, including some of the measures that have been in place in recent years.
	The second reason we support this change is that although it will lead to considerable overhauling of the two departments and, potentially, some disturbance to their activities in the next few years, I would be very surprised if it did not expose the scope for doing business considerably better and at less cost. When I was in the private sector, one particular company used to refer to Spanish practices that built up over time and institutionalised inefficiencies. I am not sure that it is politically correct to refer to such practices in that way now, but I am sure that the merger will reveal areas where things could be done considerably better.
	Thirdly, we welcome the mechanism through which the Government will deliver the merger. The O'Donnell report clearly set out different options for the Government in proceeding with the merger, including legislating rapidly for the new department on issues such as its powers or taking a more leisurely approach and allowing plenty of time for consultation on the powers of the new department. The Government have taken a sensible approach in introducing this modest enabling Bill and leaving time and scope for consultation. We share the welcome voiced by the hon. Member for Chichester for a consultation paper in January that will allow people an early chance to feed their views into the Finance Bill for 2006, regardless of which party will then be in power.
	The fourth area of agreement is on the establishment of a new Revenue and Customs Prosecution Office. As my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) said earlier, he has argued for such a body for some time, and it was also proposed in the Butterfield report. It is a sensible change.
	The fifth and final area is one in which I differ from the hon. Gentleman, although I acknowledge that he has more experience and skills in such matters, so I may be making a mistake. Nevertheless, I welcome the fact that the Government will take back some control over strategic leadership on tax policy from the two departments and put it in the Treasury. That is where it belongs.

Dawn Primarolo: indicated assent.

David Laws: The Paymaster General may not nod so enthusiastically at my next point. I believe that considerable weakness and lack of coherence has been evident in tax policy for a long period. There has been a lack of assessment of the costs and benefits of new tax proposals. Tax changes have appeared to follow short-term political imperatives and the initiatives brought forward by the Chancellor, or have followed attempts to plug tax loopholes as they emerge, no doubt on the sensible advice of the two Revenue departments, rather than being part of a coherent, long-term tax strategy.
	I pray in aid the O'Donnell report, which said that
	the precise formal role of each department is
	in other words, has been
	ill defined.
	That refers to the two Revenue departments and the Treasury. On page 99, the report also implies that at present Treasury officialsand the Treasury as a wholemay be more reactive than proactive in relation to tax policy. The report talks of ministerial policy initiatives and the co-ordination and presentation of overall tax policyan important part of the Government's work on taxbut says little about setting a broad tax strategy. I hope that the new approach to management of such matters will leave much of the expertise in developing tax policy in the new merged department, especially in relation to anti-evasion and avoidance activity. I hope that it will also lead to a more strategic perspective in the Treasury. This is certainly an opportunity for a more strategic approach to tax policy, which many businesses would welcome. It would also bring about an obligation to be more strategic on tax policy and to simplify taxation.
	As the Chartered Institute of Taxation said in its paper on the benefits of the merger for business:
	We consider that merger creates an additional need for simplicity;
	not least if the staff in the new merged department are really able to interact with customers, particularly business customers, as part of a one-shop stop. In that regard, Martin Taylor, in his submission to the O'Donnell report, said that
	integration of tax administration would be more likely to succeed if backed by a Government commitment to simplification as part of the enterprise agenda.

Andrew Tyrie: I agree with much of what the hon. Gentleman has just said, but surely the lack of high-quality cost-benefit analysis for tax changes, the increased complexity of the system, the need for more simplicity, the obsession with tax avoidance and many other things are the responsibility of Ministers not of administrators. It is to blame administrators for decisions taken by politicians to suggest that a reorganisation of the structure can solve the problems to which he has alluded.

David Laws: The hon. Gentleman is right: ultimately, Ministers have accountability for determining tax strategy and pursuing it. I am sure he is also right to say that revenue Departments and Treasury officials, if given clear and helpful advice about how Ministers want the tax system to develop, would deliver the necessary policies. However, my sense of the way things have worked in practice over recent years is that that has not actually happened, partly perhaps because much of the tax policy expertise has been in the individual revenue Departments rather than centrally. I may be naive in thinking that this reform will change that aspect of the system, but I live in hope.
	As we debate the detail of the Bill, we must remember that many people outside in the real world, especially in the business world, will not be as interested in the small elements and small changes in the Bill as in what it will mean over time for the tax system as a whole. David Frost, the director general of the British Chambers of Commerce, summed up the general view of tax practitioners and business men about the British tax system when he wrote recently:
	Britain's tax system has come into being piece by piece over the years . . . often without regard to the complexity of the whole. Our tax system is already over-complicated, but each year brings new additions and alterations. Tax simplification is often identified by the government as a goal, but progress is rarely achieved.
	I hope that setting up the merged department will be the opportunity for a more coherent tax strategy and that it will galvanise the Government into simplifying the tax system, because without simplification the benefits of merger will be much less than they might otherwise be.

John Burnett: As usual, my hon. Friend is giving a powerful speech. I fully agree with what he says about the necessity for a more co-ordinated approach to tax strategy. With that, of course, will come responsibilities for Treasury operators to accept the level of confidentiality that will be imposed on members of the Inland Revenue.

David Laws: I agree with my hon. Friend. He is absolutely right to suggest that change in the location of the policy-making bodies for tax should in no way compromise taxpayer confidentiality. The Government have already given certain guarantees about that and we shall obviously be able to probe them in more detail in Committee.
	I have covered the points of agreement in our approach to the Bill, so now I want to consider some of the aspects that are of greater concern to us and to pick up some of the points raised by the hon. Member for Chichester. I shall start by focusing on the Government's objectives in introducing the Bill and the problems that are likely to arise in its implementation. I share the concerns of the hon. Gentleman about whether the Government have a clear sense of the ranking of the achievements and objectives they want to secure through the Bill. At least three have been mentioned frequently: increased efficiency, reduced compliance costs for business and more effective tax gathering. Do the Government have a clear sense of the ranking of those priorities?
	Over recent months, we have heard much from all political parties about the need to make savings in Government expenditure. Indeed, we have heard a lot from both the Government and the Conservative party about the need to make administrative savings in Government expenditure. Much of the context for the announcement of the Bill focuses on efficiency savings and job cuts but not on the possibly bigger issue raised earlier by the hon. Member for Bexleyheath and Crayfordthe tax gap. Is the Chancellor giving short-term cost reduction too high a priority, or giving it too high an emphasis over more important objectives? Concern about that seems widespread not only among employees and their representativeswe should expect them to be worried about reductions in staff numbersbut also among professionals who have commented on the Bill.
	Those people are right to be concerned about whether the Government's focus is simply on securing efficiency savings. After all, when the Chancellor announced the merger of Customs and Excise and the Inland Revenue in his 2004 Budget statement, he did so in the context of securing value for money, as he put it, in a section of his speech where he announcedwith, I understand, no previous consultation with employee groupsa gross reduction of about 54,000 staff in the Department for Work and Pensions, Customs and Excise and the Inland Revenue. As one of the witnesses to the Select Committee said,
	any private organisation which had announced job cuts in that way would be vilified.

Dawn Primarolo: The hon. Gentleman is absolutely wrong to say that there was no discussion with representative bodies of the two departments before the Budget announcement. My hon. Friend the Economic Secretary and I, as the Ministers with responsibility for those departments, had long discussions with the unions on how to modernise, and how to make savings and efficiencies to move forward in those departments. On the very day that the announcements were made, we briefed them on that matter, so what the hon. Gentleman says is not true; the discussions were of long standing.

David Laws: I am grateful to the Paymaster General for clarifying that point and obviously I accept her comments, but will she accept that many Inland Revenue and Customs and Excise staff learned about the plans through hearing them announced on the radio or on television or by hearing the announcement made in the House of Commons? It appeared to many people that the plans were driven by the Government's political need to face down many of the criticisms made by the Conservatives about wasteful public expenditure rather than by a focus on the best way to manage the important resource of staffing in those departments.

Dawn Primarolo: The hon. Gentleman is wrong again. Both departments have a good history of partnership working with the representative trade unions. As the Gershon review was being worked onnot just on the day of the Chancellor's speechmy hon. Friend the Economic Secretary and I ensured that at each point the representative bodies knew the nature of the discussions and the likely progress that would be made.

David Laws: I do not want to get bogged down on that particular point. Having discussed the issue with local representatives of the Inland Revenue offices in my area, I can tell the Paymaster General that they seem to feel strongly about the way in which the announcement was made, and the Government should be acutely aware of that in terms of taking staff on board for a strategy that will mean considerable change.
	To return to the Government's presentation of the matter, on 23 November, the Gracious Speech announced the merger in the context of
	reducing bureaucracy and the costs of Government.
	In other words, the focus was very much on efficiency, costs and the staffing savings that could be made rather than on the tax gapthe point raised by the hon. Member for Bexleyheath and Crayford earlier.
	As earlier exchanges in the debate showed, and the hon. Member for Chichester highlighted, there is considerable uncertainty about what the economics of the merger are. I hope that the Economic Secretary will be able to clarify an important point about the 507 million savings when he sums up the debate. My understanding is that the savings of 507 million over the spending review period relate to the total reduction in staff numbers, now set at 12,500 jobs net16,000 jobs grossrather than the 3,200 job cuts that relate specifically to the merger of the departments. I should think that 3,200 job cuts equate roughly to savings of 75 million or 100 million a year, cumulating upwards over a period of time as the cuts take place. I do not see how the Government can get to a figure of 507 million over the spending review period, unless they are doing what the Paymaster General earlier criticised the hon. Member for Isle of Wight (Mr. Turner) for doingconflating the general Gershon savings with the impact of the merger savings.
	We also know from the Government's regulatory impact assessmentthin though that is on the monetary costs and benefits of the mergerthat certain costs will arise as a consequence of the merger. The Government put those costs at 75 million for the two years 200405 and 200506. Presumably, that is just a small portion of the costs that will arise as a consequence of the merger, particularly given that the figure relates to two years and that not much expenditure will be incurred in the first year, 200405.
	Standing back, as the hon. Member for Chichester sought to do, and assessing whether the Government will make any such efficiency saving at all over the period of the spending review and, indeed, over the rest of the decade, I have considerable scepticism about whether any net saving will be made from the merger. When the Economic Secretary replies to the debate, I would welcome any clarification on whether he expects any net saving during either the period of the spending review or the rest of the decade from the merger.
	My confidence in the Government's lack of clarity about such things is reinforced by the O'Donnell report, which says on page 63, in section 3.99:
	when Jobcentre Plus was created the benefit of providing a unified contact point . . . in terms of efficiencies, job outcomes, and reductions in fraud and error, were projected to equal the investment cost within seven to eight years.
	In other words, it may be well into the next decade before any net annual saving is made from the merger of the Departments.
	Does it really matter whether the Chancellor of the Exchequer and the Gracious Speech are rather over-hyping the potential to make efficiency savings, while the Government quietly, sensibly and rather elusively indicate in their own assessments that there may not be any net saving? I am not sure whether that is simply an issue of presentation, about which we should not concern ourselves. If the Government in presenting the merger and its justification put a great premium on the possible staff and efficiency savings and the Government are competing with other parties in the run-up to the general election to promise reductions in civil service numbers, a great deal of pressure could be put on the new department to make savings in staff numbers that might not be borne out by the sensible economies that the department would implement if left to its own devices.
	That point marries with the point made by the hon. Member for Bexleyheath and Crayford, and it was made very effectively in an article in The Tax Journal by John Davidson of Baker Tilly on 19 April 2004, where he says:
	If the motivation for the merger is to save money and to cut jobs, it could be to the long-term detriment of the Revenue and the taxpayer. It will save a large sum of money. At the average salary cost, the loss of 10,500 will give a saving of 267 million. This, however, is just 0.08 per cent. of the revenue raised by the two departments.
	In the year that he cited, that revenue was 338 billion, and I think that I heard the Paymaster General say earlier that it was rising to 400 billion over the period that we are considering. The article continues:
	If job cuts cause a 0.1 per cent. loss of revenue, the savings
	even those excluding the cost of the merger
	will not have been worthwhile.
	The importance of the contribution made by the hon. Member for Bexleyheath and Crayford is underlined by the similar point that Martin Taylor makes in his contribution to Gus O'Donnell's report. He says:
	the reduction of the tax gap is far the bigger prize, and should be the priority rather than costs . . . this should be made clear to the new management, who should not be judged primarily on the attainment of secondary objectives.
	That is exactly right, and the Paymaster General very helpfully and honestly acknowledgedshe need not look worried when I say thatin her earlier comments that the 3,200 staff reduction figure from the merger is itself a guess.
	The Inland Revenue officials who gave evidence to the Treasury Sub-Committee, which is chaired by the hon. Member for Sevenoaks (Mr. Fallon), were clear that the 3,200 figure was taken from guestimates of previous changes, including those in the Department for Work and Pensions. So it could be that the 3,200 figure is unlikely to be delivered and that Mr. Varney could find himself working to promises that he has given to the Government to deliver staff reductions that he would not want to bear out in practice. I hope that when the Economy Secretary replies to the debate, he will give us a clear undertaking that he and the Paymaster General will advise the chairman to focus on reducing the tax gap and compliance costs and only to reduce staff numbers when the Government can be sure that doing so will not damage those two other objectives.
	I take some hope from David Varney's contribution to Gus O'Donnell's report, where he wrote:
	It will be a challenge to keep a long-term focus on the effectiveness prizes and not fall prey to the temptation to substitute short-term cost reduction objectives.
	David Varney knows very well what the priorities are, and I hope that the Economic Secretary and the Paymaster General will strongly support him in ensuring that those are the priorities. I wonder therefore whether the Economic Secretary could give us more information about those very important issues that relate to the merger's economic costs and benefits. Will he give us a time scale for the reduction of 3,200 jobs in the merger; or is that figure so uncertain that no time scale can be offered?
	Will the Economic Secretary be absolutely clear with us about whether the 500 million savings relate to the merger or to the Gershon savings? Can the Government give us any guestimates of what the net savings will be from the merger over this spending review period, let alone any further round? Can the Economic Secretary give us any indication of whether there will be any net saving over the spending review period?
	Will any of the 3,200 job losses result from outsourcing in the two departments? I understand that Customs and Excise and the Inland Revenue have different arrangements governing the extent to which they outsource work. I am sure that the Economic Secretary would not want any pressure to be put on the new department artificially to reduce job numbers by outsourcing, rather than doing what is in its best economic interests. In particular, is there any plan to outsource the debt collection facility of the combined department?
	On the number of total employees, is the Economic Secretary confident that both departments are able to carry out their current work, particularly with tax credits, which have caused a lot of problems recently, not least because of the huge backlogs at the call centre. Is the Economic Secretary confident that, despite the job losses, the combined department will be able to introduce the new proposals on child trust funds?
	The hon. Member for Chichester is right to draw attention to the fact that the job numbers at the Inland Revenue and in the combined department appear to have increased quite a lot since 199798, but the O'Donnell report makes it clear that all the increase in job numbers at the combined department is a consequence of additional burdens imposed on the department in relation to issues such as tax credit, while the underlying number of staff who carry out the work that was done before 1997 has fallen slightly. We want to ensure that the staff are there to do those important jobs, particularly in relation to tax credits on which the lowest income people in the country depend.
	I want to probe the Government's thinking on a couple of other issues. Following the concern about the lack of clarity about costs and staffing, the second issue is the Government's expected improvement in compliance-related activity. It was clear from Gus O'Donnell's evidence to the Treasury Committee that even the Government accept that there is currently a huge tax gap in the United Kingdom. Mr. O'Donnell's evidence indicated that that gap was likely to be around 8 to 10 per cent. of revenues, which is in the order of magnitude of 30 billion or 40 billion.
	It is unusual for such an estimate to be volunteered by a senior Government official because the Government tend to be sensitive about acknowledging the extent of the problem of tax evasion and tax avoidance. Given that that figure has been put into the public domain and that Mr. O'Donnell was willing to acknowledge that the figure for uncollected VAT alone is estimated by the Government as 12 per cent.12 billion a year that would be collected if people adhered to the letter of the tax lawI am interested to know whether they anticipate that the tax gap will be closed in any way by the merger of the two departments.
	I should have liked the Paymaster General to say more about the detail of how the Government plan to close that enormous tax gap, which after all is the central purpose of the two departments. We can talk as long as we want about improving service to customers, but, as the right hon. Member for Wells (Mr. Heathcoat-Amory) pointed out robustly in the evidence taken by the Select Committee, ultimately the purpose of the departments is to collect revenue for the Government's public services and other priorities. If 30 billion or 40 billion is going missing, it needs to be a high priority for the new department to tackle.
	On compliance, the new department must focus on those entities who are in the black economy, and who are probably avoiding contact with both Customs and Excise and the Inland Revenue, rather than simply focusing all efforts on the largely compliant group of businesses and taxpayers, which could be easier targets for it. Have the Government recently estimated the compliance cost to business, one of the recommendations by the Treasury Committee in its report in 2000? Will there be an opportunity, either now or in the year ahead, to estimate the savings to business from the reduction in compliance activity? Has the Economic Secretary considered whether the tax system, in particular the business tax system, can be simplified to reduce the compliance burdens on business?

Michael Spicer: The hon. Gentleman mentions the 2000 report. I chaired the Sub-Committee that produced it. Does he accept, both in the context of efficiency and the tax take, that part of the answer to his question depends on whether the Inland Revenue or Customs takes the lead in the merger? One of the things that we encountered was that Customs was a much less effective and efficient organisation than the Inland Revenue.

David Laws: I am grateful to the hon. Gentleman for that. He speaks with great expertise, having chaired that particular inquiry. One thing that came out of the inquiry as it related to simplification was that merging the two departments, with their different histories, traditions and knowledge base, would work only if the individuals in the combined department can handle the complexity of the tax system. That requires the Government to ensure that the tax system is simplified.
	We could no doubt speak for some time about the problems with IT systems throughout government. The hon. Member for Chichester referred to those. That will also be an enormous challenge for the new department, potentially at a huge cost, which was mentioned a number of times in evidence taken by the Treasury Committee.
	To sum up, there is an enormous job to be done if the planned merger is to realise the promised benefits. This small Bill is a first and rather simple step down the route towards a merged department. We shall scrutinise the detail in Committee, but its delivery and implementation will determine whether, in the years to come, it is a great triumph or a terrible disaster. The way in which it is implemented, and the way in which Treasury Ministers and those in the new department lead the merger, will have a massive impact on whether it is a success or failure.
	We are glad that the Treasury Committee has undertaken to continue to monitor the merger. We will also watch it closely. The Government have our support for the Bill as a whole, but only if they allow managers to focus on the big potential prizes, and not if the process is driven simply by their short-term political imperatives or the need to outbid the Conservative party in cutting back on the jobs of those people who work in the public services.

Kelvin Hopkins: I am sorry that I missed the first part of the speech of my right hon. Friend the Paymaster General, but I heard the other speeches, and very good they were too. I compliment in particular my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard), whose speech was excellent.
	My concern is whether the Bill will close the tax gap or have the opposite effect. Given Labour's commitment to public services, anything that brings in more revenue to the Government is important. Some commentators have suggested that the Chancellor has a bit of a revenue gap. I would not necessarily argue that, but if he has, the extra revenue will help in the coming years.
	There is also talk of staff cuts. I have close relations with the civil service union, the Public and Commercial Services Union, which is worried about employment. Its members are dedicated public servants who are committed to the broad common good. The union wants the new department to do its job properly and wants it to be properly resourced.
	I hope that the new arrangements for prosecutions will also help to close the tax gap. If prosecutions are more effective, that will encourage those who are evading or avoiding tax to pay their taxes, as all good citizens should, so that we have more to spend on essential public services. However, the staff cuts worry me.
	I have some anecdotes of my experiences. Three or four years ago, I took it on myself to visit our local VAT inspectorate. I was impressed with what I saw. It was explained that had it got more staff, it could collect more revenue. The rough estimate was that every additional VAT inspector collected five or six times his salary in VAT every year. I wrote to Treasury Ministers, suggesting that we should have more inspectors because we could clearly bring in far more to the Exchequer than the cost of their salaries, which would be a good thing in every way. I got a bland reply, mentioning staff costs. I am afraid that I did not get a positive response.
	I also took it on myself a little while ago to visit customs officers at Luton airport. Again, the same story. They were doing a good job of catching people who were involved in smuggling drugs in particular. They wanted more staff so that they could do an effective job because they were stretched. Again, I wrote off, saying the same thing.
	PCS members and officers tell me that the same is true of personal and business taxation. With more tax officers specialising in those fields, they could collect more revenue, at a multiple of their salaries, so more staff rather than less would be good. It may be that other staff who are not inspectors and who are not directly concerned with tax collection could have their jobs modernised with IT systems or whatever, but inspectors can collect many times their own salaries. I ask my hon. Friend the Economic Secretary to give that serious thought.
	I also had the experienceagain, this is an anecdote, although I am sure the experience is not uncommonof returning from the continent 15 years ago. As one does when returning from holiday in France, I had a certain amount of wine in my car.

Andrew MacKinlay: For your own use.

Kelvin Hopkins: Very much so.
	The limits at the time were less than they are now, and I had rather more than the limit. Trying to be a good citizen, that night I drove through the red line, which said Something to Declare. Everyone else was going through the green line, which said Nothing to Declare. There was no one present at the red line, so I got out of my car and had to walk a considerable distance. I looked about 20 ft upwards to find the only customs officer on duty, who was waving people through the green line. I said, Excuse me. He said, What do you want? I said, I would like to pay my duty, please. I have a certain amount of wine above the limit. The officer was astonished. I had written out what I had bought and where I had bought it. I even had those documents that are called factures, which people are supposed to have when they transfer wine across France.
	I wanted to do the right thing. I did not wish to be prosecuted. As I have said, there was only one customs officer on duty. That suggested to me that Customs was under-resourced. It may have been that all the other officers were off sick or that Customs was not efficiently organised, but that was not my impression. My impression was that one man had been left at the port all night to wave the people through the green route. I am sure that things are better now than they were then. I am talking of 14 years ago when a public expenditure-cutting Conservative Government were in office, not a proper Labour Government who would know that we have to fund public services properly.

Rob Marris: I assure my hon. Friend that I, as a solicitor, always tried to be scrupulously honest in the same regard. I had the same experience as my hon. Friend, but there were three customs officers on duty.

Kelvin Hopkins: It was obviously a larger port or a good day. I do not know.

Rob Marris: It was Dover.

Kelvin Hopkins: It was a larger port. I was at a small port.
	I have the greatest admiration for Customs and Excise officers and for income tax officers. I have never found any fault with the Inland Revenue. I only wish that my ability to complete my tax form was half as good as the Inland Revenue's in checking it. Customs and Excise does a splendid job. It is vital to ensure that the Government get their revenue, which they can spend on public services and salaries for all our public servants. We must ensure that that revenue is collected.
	I am concerned about the failure to collect taxes. The failure to bridge the gap means that there is effectively a culture of petty criminality among people who are finding ways of avoiding or evading paying tax. That is particularly the case when importing cigarettes, other forms of tobacco and alcohol from the continent of Europe. That is not a good thing. We are a law-abiding society and I think that people like to obey the law. If we fail to police the taxation system and Customs and Excise properly, over time, we will allow that culture of petty criminality to develop.
	Allowing vast amounts of tobacco and alcohol to enter the country, illegally or legally at cheaper prices than would be charged in the UK, runs counter to the Government's public health agenda. We should maintain the price of cigarettes and, I suggest, alcohol at the levels that we think are appropriate in Britain. That is a way of constraining people from excessive consumption. We think that the continent has got it wrongI do, anyway. If it is serious about dealing with alcohol and smoking, it should introduce higher prices. Alcohol prices, as a proportion of disposable income, are now half what they were in the 1970s. Floods of alcohol are coming in from the continent that are not effectively policed or constrained.
	The money that is lost by failing to collect duties and taxes on those items is of fundamental importance to the Government. I want the Government to spend money on many other things. For example, free long-term care for the elderly could easily be financed just by collecting the tax on tobacco that is coming in from the continent illegally.
	That is an equation that I make frequently. I hope that the Government will take the point seriously. I hope also that the Bill will make a big difference in closing this tax gap. I hope that the Government will not use the measure only as a means of cutting the numbers of civil servants in the Departments, especially as the civil servants that we are talking about, above all, are the ones who collect money. They do not spend money. Their salaries are as nothing compared with the amount of money that they bring in. If we need more of them to collect more money to narrow the tax gap, we should appoint more of them. I hope that the Government will take a positive view of these fine and honourable public servants and not look to every opportunity to cut their numbers.
	There have been numerous problems with IT systems in the public sector. Is it not time that we looked to have more in-house IT systems rather than relying on what are clearly unreliable private companies? The contracts have gone wrong on so many occasions. Surely it is time that we looked seriously at an in-house public sector IT facility or brought in-house as much as we can of IT systems and services.
	I hope that the Government do not seek to outsource any of the services that are undertaken by the Inland Revenue and Customs and Excise. Above all, we need people in these services who have a sense of dedication to the public sector and who believe in and feel that public service ethic. They are people on whom we depend for the civilised society in which we live. It would be a mistake to push them into the profit-making sector. I hope that they will be kept as directly employed public servants and that they will continue to collect the 30 billion or 40 billion that we have heard about so that we can have more to spend on the health service, education and all the other fine public services.

Michael Fallon: The House will be impressed by the integrity of the hon. Member for Luton, North (Mr. Hopkins), given his vignette about his return from France. He spoilt it only slightly by suggesting that under a Conservative Government there were fewer customs officers on duty. It is true that, under the Conservative Government, duty was much lower than it is now.
	The hon. Gentleman made some important points about jobs, to which I shall return. It is important that Ministers address seriously the argument that the PCS has advanced. It has been put to the Treasury Sub-Committee. I am grateful for the kind words that have been said about the report of the Sub-Committee, which I have the honour to chair. The Committee, as my hon. Friend the Member for West Worcestershire (Sir Michael Spicer) reminded us, has been on this track for some time. It was in 1999, when he chaired the Committee, that it first recommended that a feasibility study should begin of the prospects of merging these two great and historic Departments. It was a year later, after taking evidence about other countries that had merged the two services successfully, and notably Canada, that the Sub-Committee made its final report in April 2000, recommending a full merger between the two Departments.
	That recommendation was rejected by the Government, as has been said. One of the things that puzzled the Sub-Committee when we came to consider the merger again was why the Government had changed their mind. It is important for the Government to declare why they have now accepted the recommendation.
	I was alarmed by the permanent secretary's reply when he was asked why he had changed his mind. He pointed to the record of other bits of Whitehall being merged. He pointed to the emergence of the Department for Work and Pensions. I do not think that it is necessarily the case that the functions carried out by that Department are demonstrably better carried out now than they were when they were distributed among other Departments.
	Secondly, the permanent secretary suggested that the creation of the Financial Services Authority, which had taken on the functions of a number of different regulators, had also encouraged the Government to think again. I am not sure about that parallel either. Regulators are much smaller than the bodies that we are now considering.

Michael Spicer: My hon. Friend is making a strong point about the Government changing their mind. Perhaps an even stronger point is that we have had a change of Ministers between the two decisions. I think that the Paymaster General was in office at the time.

Michael Fallon: My hon. Friend makes the point. We were surprised when we heard the announcement a year ago and it is worth trying to probe the Government on the reasons that they put forward. The evidence that we took from the Institute of Chartered Accountants of Scotland pointed to a very different parallel. It said:
	From past experience of the merger of the Inland Revenue and the Contributions Agency, the proposal to merge the Revenue and Customs does not inspire confidence.
	It pointed out that, five years on, those two bits of the Inland Revenue still cannot properly exchange information on their computer systems. That is why it is important that this merger, which I welcome, is justified on genuine grounds. It is not enough to say that it is simply strategic or that such mergers have worked elsewhere in Whitehall.

David Ruffley: In the course of my hon. Friend's Sub-Committee's inquiry, was he furnished with any statistics showing the greater cost and efficiency savings that should be delivered by the merger?

Michael Fallon: We probed hard on that point and I will come to the costs and benefits, but first I want to deal with the reasoning behind the merger. As I said, it is not enough to say that merging two departments like the ones covered by this Bill has worked with other departments or that the decision is simply strategic. In the business world, that would not justify a merger. I should remind the House of my business interests. One usually becomes involved in a merger in business because one can convince the board or shareholders that a merger will add value, reduce costs and make organisational sense. I had hoped that the Ministers behind the Bill and the Chancellor would have set the case out more clearly.
	To be fair to Ministers, they have set out some reasons. First, they have said that they hope that the merger will improve taxpayer compliance to close the tax gap. Several colleagues have already mentioned that important point. Secondly, Ministers have said that the merger will reduce the cost of compliance and, thirdly, that it will reduce the costs of collection. If those are the three stated objectives behind the merger, we should, as my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) implied, perhaps have had a stronger indication of the exact savings that can be quantified.
	Any merger in the private sectorDavid Varney has been involved in a number of mergers in the private sectorwould have been preceded by a proper cost-benefit analysis. We pressed the permanent secretary and Mr. Varney hard on that point and, although it is hard to be sure, there appears to have been some attempt at quantifying the actual costs and benefits. However, that attempt seems to have been abandoned. We recommend in our report that such analysis should take place as soon as practicable. Even if we believe that the Government's explanation that we cannot properly cost the savings until some of the second-order issues are resolved, we are still entitled to ask for the cost-benefit analysis to be carried out as soon as possible.

David Ruffley: Is that explanation not puzzling given that, under the Gershon review, very detailed numbers have been given for efficiency and cost savings? Is there not a contradiction there?

Michael Fallon: There is a contradiction and I would have expected the Sub-Committee to have been presented with more detailed analysis than we received.
	The explanatory notes on the Bill contain a particular figure. It is tucked away in paragraph 284, which tells us that integration
	will lead to initial costs of around 75 million over the two financial years 2004/2005 and 2005/2006.
	At least we have some indication of the initial costs.
	The Paymaster General has also told us today I think for the first timethat there will be savings of 500 million by 2007. It is still not clear where those savings will come from: whether they result from the 3,200 posts that will be scrapped directly, from the Gershon exercise or from a combination of the two. When the Economic Secretary winds up, I hope that he will be clearer with the House about the figure of 500 million. As the hon. Member for Yeovil (Mr. Laws) said, it seems a large figure if we are simply talking about the 3,200 posts. I am not clear whether it is a cumulative figurethe Government have previously counted things several timesor whether it is the actual figure that directly relates to the cost savings.

David Laws: Is the hon. Gentleman suspicious, as I am, that the Paymaster General may have muddled up the savings from Gershon with the savings from the merger? Is he particularly suspicious given the answer that David Varney gave to his question in the Select Committee hearings? David Varney said that there would savings of 507 million over the spending review period and a saving of 12,500 jobs net, a figure that clearly relates to total job savings and not just to the merger itself.

Michael Fallon: I am not clear on that point and it falls to the Economic Secretary to clarify the figure of 500 million when he winds up. He must tell us how it has been arrived at, whether it is cumulative, whether it includes the 3,000 posts, whether it excludes Gershon and whether it relates to annual savings.
	The only other hint of further costs, rather than savings, is the reference on page 10 of the regulatory impact assessment. It suggests that there may be further costs to integration resulting from changes to join up some of the services that the two departments currently provide. It states:
	These cannot be quantified until the associated policies have been agreed.
	We are not quite clear what those costs are, but it is clear that they are costs and not savings. The Economic Secretary owes us a further explanation of the costs and benefits and I hope that he will reply to our specific recommendationI do not think that the Paymaster General quite didthat the costs and benefits should be quantified as soon as practicable when the integration policies are agreed and brought back before the House.
	The hon. Member for Luton, North raised the important issue of jobs, which is well documented in the PCS's submission to the Sub-Committee. We are told that, as part of the Gershon review, 12,800 full-time posts will be scrapped and that, as a result of the merger, 3,200 specific posts will be lost. That is a rather one-dimensional view of efficiency savings. When one asks Ministers and David Varney about the savings that will result from merging these two great departments, they respond only in terms of the number of posts to be scrapped.
	As someone more distinguished in the Treasury keeps saying, it is not the job title that one holds but what one actually does that matters in government. It is not right simply to consider efficiency savings in terms of the number of jobs that will be scrapped. Instead, I would have expected to hear from the Government how the work load of the two departments, once merged, would be handled more efficiently.
	I would have liked the Government to have responded much more vigorously on the whole issue of reducing the costs of compliance for business. If it is true that a merged customs and revenue service is going to result in reduced compliance costs for individual taxpayers or for business, I would have expected the Government to have set themselves more vigorous targets.
	In an earlier Sub-Committee report, we said how impressed we were by the Finance Ministry in Holland in which officials have been set a specific target of reducing by 25 per cent. over four years the costs to business of complying with taxation. It has introduced modelling for the smallest businesses that enables it to measure the actual costs to small businesses, shopkeepers and medium-sized firms of filling in tax forms and of complying with the tax burden. Some 17 people in a unit in the Finance Ministry are dedicated to reducing the costs of compliance. I hope that Ministers will set the new service a much more specific target for reducing the costs of compliance for business.
	I turn to the Bill itself, which is only the first of two Bills. I have two problems with that. Because the Bill is so minimalist, there is a risk, as the regulatory impact assessment pointed out, that its scope is inadequate. Because it is so minimal and has been introduced so quickly, it may not fully cover the arrangements that need to be put in place. I was alarmed to hear that we are to be faced with Government amendments to the Bill as soon as it starts in Committee. I very much hope that when choosing the two-stage minimalist approach, the Government have drafted the Bill correctly.
	There does not appear to be a firm commitment to the second stage. The Department said:
	More substantive change, and change requiring further legislation, will be considered as part of a longer term programme of work.
	That does not sound like an explicit commitment to a second-stage Bill, although I understood the Paymaster General to say earlier that there was a commitment to produce the second stage in 2006 or 2007. Perhaps the Economic Secretary could clarify that. It is worth some clarification, because we have some experience of two-stage reform. We are still waiting for the second stage of House of Lords reform, which still has not emerged some years after the first stage was introduced.
	Secondly, there is the issue of powers. I welcome the non-transferability of powers to prevent any inadvertent widening of powers in the new department. That will need to be scrutinised in Committee. It reinforces the need for further legislation and for that to be forthcoming reasonably early, to ensure that the powers are appropriate, proportionate and fit for purpose. If the Government are committed to those teststhat the powers they are taking are to be appropriate, proportionate and fit for purposethey need to get on with the consultation and get the new powers into statute as soon as possible.
	One specific power that will concern anyone who scrutinises the Bill in detail is the power in clause 10 requiring officials to comply with
	any directions of a general nature given to them by the Treasury.
	The explanatory notes are helpful. They state that that excludes directions on the day-to-day management of the service or on operational matters. The intention is fine, but the clause is not sufficiently tightly drafted. It might be helpful if the Government specified exactly what those
	directions of a general nature
	might cover. It might seem odd to ask for a general direction to be specified, but it would be helpful if we knew what kind of directions Ministers had in mind, given that the drafting of the clause is so wide.
	I turn to confidentiality, on which I intervened on the Minister. That is a matter of concern to me and the rest of the Sub-Committee. We should always be concerned about confidentiality. I welcome the strength of the Paymaster General's view this afternoon. A further reason for concern is that the departments are being merged into the Treasury building. That puts into sharp relief the question whether we can ensure that officials who are using the same building, sharing the same cafeteria and meeting in the same corridors are properly separated from the Ministers and special advisers who have the more political function.
	Given that point, I hope that the Economic Secretary will clarify the downgrading of the oath and statutory declaration. We were told in evidence that it is no longer an oath but a statutory declaration. But, as my hon. Friend the Member for Chichester (Mr. Tyrie) said, a statutory declaration made and witnessed at the beginning of each official's employment has some solemnity about it and brings home to the person making the declaration just how serious the matter is. It is therefore not sufficient to write the terms of the declaration into the statute. How many officials taking up office will read the Act? Ministers ought to look again at that and reassure the House. If it is part of the employment contract of staff of the new department, there could still be a case for making that a statutory declaration in front of witnesses, as part of the employment contract. That may be Ministers' intention, but it was not clear from the remarks of the Paymaster General. I think that she appreciates the concern and I hope that the Economic Secretary will clarify the matter.
	Finally, on the Bill, I turn to accountability. When we first heard about the merger a year or so ago, I expected that a single department would report to a single Minister. It now appears that the new merged department will report mainly to the Paymaster General, but also to the Economic Secretary on excise duties and green taxes, and to the Financial Secretary on stamp duty, taxes on savings and taxes on pensions. This is not a political point. The hon. Member for Bexleyheath and Crayford (Mr. Beard) made the same point. It is cumbersome for a new single merged department to report to at least three Ministers. The Treasury Sub-Committee will want reassurance that the lines of accountability are not blurred and that everything possible is being done to narrow accountability to one particular Minister, who I expect to be the Paymaster General.
	I shall touch on two other issues that are not directly referred to in the Bill, but that flow from the merger proposal. The first is the department's estatethe buildings that it will occupy. I make no apology for returning to the issue of Mapeley, which has preoccupied my Committee and the Public Accounts Committee over the past two or three years. Because the departments are being merged, the case for rationalising the estate and being clear about the costings of that estate is all the more obvious and important. That brings us back to the Mapeley costings. As the House may recall, the National Audit Office estimated that the facility pricein other words, the cost that the departments will pay Mapeley, the private sector consortium looking after the officesshould have averaged out at about 170 million a year over the 20 years from 2001. In a letter on 24 November, the Paymaster General told me that the payments to Mapeley in the first three years were 235 million in 200102, 306 million in 200203 and 311 million in 200304. Those payments were significantly higher than the NAO expected, and we must ask why. One would expect more rationalisation from a merger, and even after the Mapeley contract was signedwe will not go into the sad history of its offshore sourcingone would have expected some variation to the contract to have been sought to reduce the number of offices occupied by the merged department.
	In her letter, the Paymaster General explained why the NAO price of 170 million a year is nowhere near the 300 million a year that she now pays:
	NAO modelling is based upon initial pre-contract modelling assumptions and as such would not be expected to capture changes in the profile of the estate due to new legislation or changes in the departments' business model.
	Why not? The merger will provide the department's new business model and changes in the legislation.
	One would have expected some rationalisation, but instead we have costs. I accept that the costs are for the first three years of a long contract, but they are now running at nearly twice the NAO assessment of the facility's price. The point of putting offices under private sector management is to get away from the department's business modelling and forecasting and into the real world, where people experienced in estate management and commercial property can weigh up matters and make the required savings. In the private sector, such a merger would yield immediate savings by sharing offices, rationalising space and utilising fewer, not more, square feet. In other words, the price paid to Mapeley should be falling, not rising.
	In the end, the Bill is about improving the service that the customer gets. In rather a chilling phrase, the Paymaster General said that she wants to improve the taxpayer experience. Over the past few years, taxpayers have had much experience of paying more and more taxes. Taking her comment at face value, it is important to focus on the aim of the exercise, which is to improve the service to individual taxpayers and, indeed, business taxpayers. The record over the past few years is not particularly good.
	The tax credit fiasco, on which my Sub-Committee reported, is not an encouraging precedent. The scandal of deficiency notices that are issued late or not at all again shows that the follow through is not particularly good when changes are made in Whitehall. Evidence is also emerging that the Revenue is not as good at running the benefits system as it was at running the tax system. We must focus on the service that the customer gets. From my experience of constituency casework, the Revenue and Customs must re-examine their interface with customers. For example, the helpline service is not nearly good enough and needs improving.
	I am not sure whether peopleperhaps even hon. Membersare sufficiently aware of the function of the adjudicator, who rules on complaints against the Revenue and its various sub-departments such as the valuation office. Last year, the adjudicator investigated 374 cases in the Inland Revenue and 98 cases in Customs and Excise, which is not an awful lot. We should use the opportunity presented by the merger to revamp the way in which the Revenue and Customs treat those who pay for them and rely on their servicesthe situation could and should be better.
	Let me sum up. The merger was recommended by the Sub-Committee and is probably a good idea, but it needs to be driven by set objectives and against measurable benchmarks. I welcome this initial legislation and wish Mr. Varney and his team well in implementing it, but I put him, and Ministers, on notice that this is not the end of the story as far as the Treasury Sub-Committee is concerned. We will return to the merger at six-monthly intervals to see how it is getting on, because the stakes are very high indeed.

Peter Atkinson: It is a great pleasure to follow my hon. Friend the Member for Sevenoaks (Mr. Fallon), who, in his position as Chair of the Treasury Sub-Committee, has done a very thorough job in picking over the bones of this dry but important Bill.
	There was not much levity in the debate apart from that provided by the hon. Member for Luton, North (Mr. Hopkins), who described his experiences in trying unsuccessfully to pay duty on wine. Sadly, he has left the Chamber; I was going to advise him that if he really wants to be done over by Customs on arriving back in this country, he should not look so honest and should drive a white van laden to the springs with wine.
	Another moment of levity came from the Paymaster General during her rather long and sombre speech, when, as my hon. Friend the Member for Sevenoaks said, she told us that she wanted to improve the taxpayer experience.

Dawn Primarolo: I am not bothered what the hon. Gentleman thinks about my speech or its tone, but I gave way endlessly to hon. Members, mainly to his hon. Friends, out of courtesy, and to rebuke me for that seems a bit foolish, as it will not encourage me to do it again.

Peter Atkinson: I am sorry that the Paymaster General is upset, but she leaped to her feet a little too soon. I understand why she spoke so fullyit is a detailed matter and she had to deal with many interventionsbut I merely wanted to ponder on her use of the term, taxpayer experience. That almost sounds as if dealing with one's tax is a form of entertainmentthere is a tourist attraction in Ayrshire called the Tam O'Shanter Experienceand I had a vision of the Paymaster General trying to make taxation more exciting.

Dawn Primarolo: indicated dissent.

Peter Atkinson: She obviously does not agree.
	The main unanswered question about the Bill is what lies behind the renewed enthusiasm for the merger. Until now, it has been a classic example of something that lots of officials think a good idea, so it gets taken off the shelf, dusted down, put back, forgotten about and eventually taken back down again. I would be rather worried about an idea that Mr. Gladstone considered and rejected. We missed out some of the history, because Prime Minister H. H. Asquith had a nibble at it when he merged Customs and Excise.
	As my hon. Friend the Member for Chichester (Mr. Tyrie) said, another unanswered question is whether the exercise is worth the candle. We will find out as the Bill progresses. I suspect that my hon. Friend was on to something when he suggested that the Chancellor wants to do this to set an example before he starts to lay about Government Departments. He could have triggered it through a series of timed statutory instruments; indeed, he could have postponed secondary legislation almost indefinitely. The merger is to proceed so incredibly slowly that it does not need to have a great deal of effect, but it enables him to say to other Ministers, We've put our house in ordernow put yours in order.
	Another unresolved matter, which I hope will be resolved shortly in the winding-up speeches, concerns how many staff will be involved. The figure seemed to change almost daily between the Chancellor's first announcement in March and the evidence given to the Treasury Sub-Committee in October.
	Some years ago, the Conservative Government considered what to do about the Inland Revenue and Customs and Excise. It was the subject of much discussion. One suggestion was that the Inland Revenue should merge not with Customs and Excise but with the then Department of Social Security. That option has not been considered. As the Inland Revenue increasingly becomes a tax and benefit-paying operation, it almost makes sense for it to be part of the Department for Work and Pensions rather than merging with Customs and Excise, which, as we have heard, has a different philosophy from the Revenue.
	The original Excise men were military figures, with their cutlasses and armed ships. Indeed, they chased the forebears of my constituents who had a readily available supply of illegal whisky stills in the Northumberland hills. The Excise men would wreck the stills. It was said that they were given a reward if they found a still, so when a still burned out, its owner would tell the Excise man who then discovered it and collected a reward. The distiller would receive half, which helped him to build a new still further up the hills. That was Northumbria a long time agobut it is rightly said that the philosophy of the two departments differs greatly.
	Customs and Excise clearly has much more of a policing role. That is well set out in the various submissions to the Treasury Committee by the Association of Chartered Certified Accountants, which is worried, probably rightly, about the gung-ho mentality that exists in the Customs service, as opposed to the gentler, more considered approach of the Inland Revenue. I know from experience of running a disorderly businessin its early daysthat the VAT man was a sight tougher than the tax man. Anyone who fell behind with VAT payments had little leeway, whereas it was always possible to negotiate some settlement with the Inland Revenue. There are genuine concerns about the different attitudes.
	Let me comment on the problems that the Revenue experiences in paying the tax benefits. I am sure that all hon. Members have had constituency cases of overpayment of tax credits that are now being reclaimed, in some instances with a great lack of care for the victim. Obviously, some people must have realised that they had been overpaid, but others did not. They read the forms and thought that they were getting it approximately right. I have a constituent who received 150 in tax credits and has had the sum reduced to 30 a month. That has made a serious difference to her life. To echo my hon. Friend the Member for Sevenoaks, it is almost impossible to get through to the helpline. My constituent came to me to circumvent the difficulty of contacting the helpline.

James Gray: My hon. Friend is right. I have a constituent who is being asked for 7,500 that was wrongly paid to him, despite the fact that he phoned the Revenue on every occasion to check that the calculation had been done correctly. He was assured that it was correct until the final occasion, when he was told that a glitch in the computer system had resulted in an overpayment of 7,500. His wife is pregnantthey had planned to expand their family based on the department's errors.

Peter Atkinson: That is a graphic illustration of the trouble that overpayment causes. It has affected many vulnerable people, who now need help because of the mistakes in the payment of benefit. There have also been computer problems and difficulties with the private finance initiative deal, which has also been mentioned.
	I remain in favour of considering the merger, but hon. Members need more information about its objective. What are the costs and benefits? Will it improve the service and make the promised substantial savings? Or will it usher in a long period of confusion and muddle, which will cause considerable difficulties to the customers of Customs and Excise and the Inland Revenue?
	Finally, there is an issue of accountability that still needs properly to be resolved. The commissioners of the Revenue and of Customs and Excise are appointed by the Crown and are responsible to the Chancellor. Lord Bridges, the archetypal Sir Humphrey, when trying to examine the relationship between the Revenue, Customs and the Government, said:
	The Inland Revenue and HM Customs and Excise are responsible to the Chancellor, and are subject to a measure of Treasury direction. This however means Ministerial direction. The officials of Revenue and Customs do not take orders from Treasury officials.
	That was an interesting, if slightly Sir Humphreyish, statement for Lord Bridges to make at that time, and I wonder whether that will continue to be the case under the new regime, or whether Treasury officials will give instructions to the commissioners of the new joint organisation.

John Burnett: As my hon. Friend the Member for Yeovil (Mr. Laws) said, we welcome the thrust of the Bill and the principle of merging the Inland Revenue and Customs. However, we temper our welcome with the important caveat that there will be much more detail in the draft regulations, which we look forward to receiving in plenty of time before we debate the Bill in Committee.
	I have for some time advocated the subsuming of the prosecution functions of the Inland Revenue into the Department under the aegis of the Attorney-General, and I strongly support what is now happening in that regard. I also strongly support the establishment of a separate, independent prosecution service and the fact that it is to be inspected regularly by the Crown Prosecution Service inspectorate. I presume that there will be some financial consequences, but it is difficult to judge what they will be. Since January 2003, the Customs prosecutors have come under the Attorney-General, and I wonder what additional staffor perhaps whether fewer staffhave been employed since that time, and whether that has involved savings or additional costs.
	I welcome clauses 23 and 24. The recent establishment of the Independent Police Complaints Commission goes a long way towards answering the impossible question: who will guard the guardians themselves? It appears to be settling down well, but there are bound to be resource implications for the IPCC taking on this additional work. Do the Ministers have any idea what those implications will be? Some indication would be welcome. My second question relates to a difficult point. The IPCC is, and should be, independent, and it is up to the commission to run itself. However, it would be interesting to know whether the Ministers have a view on whether the police function within the IPCC should be separate from the Revenue and Customs functions.
	I want to refer to the matter of tone and culture, but before I do so, I want to say to the House that we shall debate information sharing and confidentiality in Committee, and that we shall also return to the necessary matter of powers. I am grateful to the Paymaster General for setting out just a few of the important points of principle. This impinges on what my hon. Friend the Member for Yeovil said about the Treasury having a function on the macro side of setting tax policy. I hope that clear guidelinesthere are already somein relation to absolutely solid and enforceable duties of confidentiality will be provided for anyone who, under this Bill, has access to Revenue information As has been said, the Revenue has an enviable culture, and the vast majority of people do not want to break the law. Tax law, however, is extremely complex, taxpayers often do not have a clue what the law is, and it is difficult for small professional firms of advisers to keep up with the complexity of the law and its changes.
	In my experience, the Revenue is helpful, in so far as it is accessible locally and reasonably willing to give sensible adviceobviously, its view is not necessarily the correct one, but it is helpful. I hope that such local delivery will be a model of the new department, so that Customs specialists will also be at hand in local offices and will accept Inland Revenue practice.
	On training, I refer the Economic Secretary and the Paymaster General to Mr. Justice Butterfield's conclusions. Two particular points should be noted from that Customs inquiry, as hundreds of millions of pounds in duty were lost and an unfortunate series of bungled prosecutions occurred. First, Mr. Justice Butterfield recommended that there should be regular refresher training for investigators, and secondly, that investigators should be subject to systematic external scrutiny. In Committee, we will examine these matters in some detail, and we will want to hear exactly what has happened since the Butterfield report, and on what standards of training the new department will insist. I know from experience that the inspector of taxes course is of high quality and is also recognised in the private sector.
	To conclude on the question of culture and tone, I practised as a tax practitioner for 25 years, and I do not believe that in the course of that period I ever had cause to complain about the conduct of members of the Inland Revenue. I hope that, in 25 years' time, practitioners will be able to say exactly the same of the new merged organisation.

David Ruffley: This Bill on the merger of Inland Revenue and Customs and Excise carries the general support of the Opposition, although we remain concerned, as the House will have noted, about its practical implementation. We are dealing with two organisations that have between them 250 legacy computer systems and some 13 million customers. It is no mean feat to put those two together, and we will want to examine the details extremely carefully, not just during consideration of the Bill but in the first few months and years of the merger.
	I had the privilege of sitting on the Treasury Sub-Committee in 2000, which was then chaired by my hon. Friend the Member for West Worcestershire (Sir Michael Spicer). In the course of our inquiry, we came to some conclusions: that the possibility of a merger had not, by 2000, been examined properly by Ministers; that differences in the functions of the two bodies were not insurmountable obstacles to a merger; and that a merger was in fact desirable.
	Our 2000 report noted several concerns relating to the closer working programme, whichI should say in all fairnesshad been developed not since 1997 but since 1994. We concluded that the programme had not been a great success. There seemed to be no general philosophy or rationale underpinning the various areas chosen for closer working between the two departments. The witnesses whom we consulted could cite few specific benefits to businesses as a result of the programme, and Customs and Excise gave us no clear idea of how it intended the programme to develop in the future. We agreed with the programme's aims, but did not feel that it was achieving its objectives. When we examine the way in which the two departments have tried to co-operate so far, we do not see a happy set of antecedents.
	We were rather disappointed by the Government's response to the report. The possibility of a merger was rejected, and the explanation given was this:
	while the Government accepts that merger might bring some of the benefits outlined by the Committee, it believes that they can be achieved without the disbenefits of merger through a dynamic and focused programme of closer working.
	The Government have clearly done some more thinking during the three or four years since that statement was made. Like other Conservative Members, I am prompted to ask the reason for the turnaroundthe sudden Damascene conversionespecially in the light of the paucity of statistical information and data about cost and efficiency savings in the medium term.
	We know that there will be transitional costs upfront, but although the Government seem to have moved to the right side of the argument, we have not seen enough of their working. Some indications of why their views had changed were given in the O'Donnell review, which concluded that a merger would be a good ideaalthough it noted at the same time that risks were involved in the business as usual tax collection model, and that the disruption of projects already planned could attend any merger.
	I wonder whether the rather sad events of spring and summer 2003 might have prompted the O'Donnell review. As we all recall and as was mentioned earlier, a computer system that was installed did not deliver, and the fiasco of the working tax credit and child tax credit payments ensued. The Treasury Committee, of which I was a member, took evidence that revealed an unfortunate set of management relations at the Inland Revenue. We also discovered that when the national insurance contributions office was taken away from social security officials in Whitehall and merged with the Inland Revenue, the left hand did not know what the right hand was doing. That led to the shambles of the deficiency notices: Ministers were not aware that they had not been issued, and large parts of the civil service did not know either.
	That brings me to two of my concerns, which have not been dealt with by my hon. Friends' trenchant criticisms of other aspects. They relate to information technology. The Treasury Sub-Committee noted the views of the Institute of Chartered Accountants of Scotland:
	From past experience of the merger of the Inland Revenue and Contributions Agency, the proposal to merge the Revenue and Customs does not inspire confidence. As organisations, the Contributions Agency and the Inland Revenue had different computer systems and five years after the merger had been completed they still have computer systems which cannot exchange information and accordingly duplicate enquiries and impose unnecessary additional costs on taxpayers in general.
	In speaking to the Treasury Sub-Committee, David Varney made clear the scale of the IT problem for him and the associated risks. Indeed, he was very up front, and it might assist the House if I give a flavour of what he said:
	We have 250 major IT systems, and we have 3,000 staff
	working in IT.
	It is a huge expenditure . . . We, per year, put out 170 million forms and we run 100,000 desktops. So this is a big issue for us. I think what we are bringing in
	in the recent recruitment of a chief information officer
	is expertise of somebody who has a track record of managing change in IT and delivering business benefits. We also have to get smarter at our pre-risking and big risk minimisation projects, talking through both the IT risk and the operation.
	Amen to that. The Paymaster General will doubtless work closely with Mr. Varney on the implementation of change in the IT systems.
	However, I offer a strong word of warning. When the computer failures occurred that were responsible for the working tax credit and child tax credit shambles, and for the deficiency notice problemwithout even considering the Mapeley problem, which is different in qualitative termsthe chairman of the Revenue came before my hon. Friend the Member for Sevenoaks (Mr. Fallon) and I, and said that the Revenue take this issue terribly seriously. He said that a lot of time had been spent stress-testing the system before putting it in place. He acknowledged that it was very complicated, and said that they would spend a lot time ensuring that they got it right.
	The problem is that warm words are no use when the system crashes or fails to work in an optimal fashion. Who suffers? The taxpayer suffers, and bad governance is the result. That does no good for the Government of the day, or for democracy and our constituents.
	I pray in aid the National Audit Office, which noted in its recent report:
	Contingency plans are needed to handle any changes resulting from the O'Donnell review.
	I have great regard for the Paymaster General, who gets into the interstices of her brief. I hope that she will put contingency plans in place, and she will doubtless ask her officials to speak to the NAO and other stakeholders. We need to bear in mind the huge risk involved. We do not want a repeat of the IT shambles.
	My final point, to which reference has already been made, concerns enforcement and the culture of the departments that will be merged. I welcome the placing on a statutory footing of the new Revenue and Customs Prosecution Office, which will undertake all the new department's prosecutions. However, I am not entirely clear as to how it will be staffed, or how the varying expertise of the current Inland Revenue and Customs and Excise prosecutors will be melded.
	In 1999 and 2000, my hon. Friend the Member for West Worcestershire and I examined how the experience of the Canada Revenue Agency compared with ours, and we discovered that it was similar. To put it bluntly, the expertise of those in the revenue departments here and in Canada is of a higher quality than of those in the customs and excise departments. That is simply a cultural difference. Melding the two to achieve an optimal solution is what this is all about. However, the most recent Select Committee reportthe proceedings were chaired by my hon. Friend the Member for Sevenoaksstated that
	witnesses were concerned about the different approaches of the revenue departments and how this might impact on the new department.
	Those concerns were summarised by the Association of Chartered Certified Accountants, which said:
	The Inland Revenue is more prepared to negotiate and has a more human face. By contrast, mention Customs investigators to accountants and businesspeople and exasperation sets in. Once the Revenue has made a ruling, it generally sticks to it. VAT offices change their minds more oftenpartly because they tend not to commit themselves in writing.
	There is clearly a culture problem and I hope that, when the matter is put to bed, we adopt a pretty robust approach to change management. Ministers should adopt a hands-on approach to ensure that the execution of the merger takes the different cultures into account, but not use that as an excuse for things not going right. We need people to get thinking the right way and to do so quickly.

John Burnett: Does the hon. Gentleman agree that one aspect of the co-operation between taxpayers and the Inland Revenue is the fairly widespread system of clearance procedures? It would be interesting to incorporate that approach rather more frequently in customs matters.

David Ruffley: I am sure that those implementing this huge change will reflect on the good point that the hon. Gentleman has just made.
	Mr. David Varney said that there is a need to look further into the different powers and cultures of the current Revenue and the current Customs and Excise. He said:
	I think the proposition we will be putting, if the Bill is introduced, will be to keep the powers that each individual tax activity has in place and to accept that when
	the new department
	is up and running we will look again at the question of proportionality of powers in the context of broader institutions that exercise powers of enforcement.
	It will be incumbent on the House and associated Select Committees carefully to scrutinise how well the powers vested in the merged department are meshing together. Clearly, there are different kinds of powers and a different enforcement culture in the two departments pre-merger.
	For all those reasons, it is fair to say that this side of the House welcomes the merger in principle. Some of us have argued in favour of it for four or five years. We wait to see whether Ministers will clarify whether some of the savings that they talk about are Gershon savings or other savings. What are the medium-term savings and what are the short-term transitional costs? We look forward to greater clarification of those matters.
	Finally, we expect the Paymaster General to make two specific undertakings. First, she or her successors should not come back to the House with rather poor or lame explanations for why the IT has not worked. That will simply not be good enough. She and her officials must redouble their efforts, and not lapse into some alibi society as they did with the working tax credit computer model, when they said that they stress tested it, that everything was ready to go and that they simply could not understand why it was a dog's breakfast on the day it went live. No more excuses of that sort will be acceptable to the House.
	Secondly, in view of the different cultural mores of these organisations, new uniform management and working together will have to be forced through. We cannot allow excuses such as saying that organic change takes a long time. We want the merger to work and to work as soon as possible. I therefore give a qualified welcome to the Bill on Second Reading.

John McDonnell: First, I apologise for attending the debate so late. I had a constituency engagement, the Ealing Family Housing Association annual pensioners' Christmas dinner. When they reached the Christmas carols, particularly Oh Come, All Ye Faithful, I thought that it was time to come to the Chamber.
	Normally, out of politeness to the House, I would not intervene in a debate that I joined so late. However, I do not appear at risk of being trampled to death by other Labour Members wishing to speak so, in my capacity as chair of the Public and Commercial Services Union all-party parliamentary group, I shall make some comments about staffing matters.
	I want to begin with a general point about how legislation is considered these days, and what information is provided to the House in connection with staffing and manpower issues. Over recent years, the consideration of Bills has been refined. The explanatory notes accompanying a Bill now contain detailed assurances in respect of costs and compliance with human rights legislation. They also refer to staffing implicationsthat is, the impact on public service manpower.
	That information enables the House to try and identify individual costs and, in some cases, potential savings, but the system gives us a minimum amount of information about manpower issues. The one sentence on the topic in the explanatory notes for this Bill states:
	There will be a net reduction of approximately 3,200 posts as a direct result of the integration.
	Admittedly, the Treasury Committee looked in more detail at the staffing reductions consequent to the Bill, but even then the information provided was fairly peremptory. It identified that about 3,000 jobs would be cut as a result of this Bill, in the context of the other staffing reductions that were taking place. About 8,000 jobs will go as a result of the Gershon review and other studies, but the losses implied by the Bill will bring the total of jobs lost in the relevant departments to something like 12,500.
	Elsewhere in the public and private sectors when departments are rationalised and merged on such a scale, or when an organisation is reviewed or restructured, it would be expected that some significant detail about the new staffing levels would be made available. In addition, matters to do with staff structures would be covered in a report from the human relations department involvedwhat used to be called the personnel departmentsetting out the range of posts that would be lost, and the responsibilities that rested with those posts. Such a report would also outline the new structures being established, and possibly offer some detail about new posts and their functions. As a result, people could use that report to determine whether the new structures would be workable, in comparison with what had gone before.
	Interestingly, only a minimum amount of information on staffing implications has been provided with this proposal. More importantly, however, we know in some detail what went on before. The Treasury Committee has conducted many reviews and produced many reports over the years. Those studies have made it clear that both Customs and the Inland Revenue are world-class services. There is no doubt about their probity and the efficiency of their tax collection in many respects, but it is also clear that both services are open to innovation.
	I compliment the Government on their spend-to-save and spend-to-raise initiatives, which are proving exceptionally successful, and have enjoyed cross-party support. That success has been highlighted by the Treasury Committee.
	I pay tribute to the hon. Member for Sevenoaks (Mr. Fallon), as the Treasury Sub-Committee has also been very frank about mistakes that have been made. That may have embarrassed the Government, but the Select Committee has a job to do and it has done it effectively. To be candid, it is clear that most failures in the past have not been blamed on staff at Customs and Excise or the Inland Revenue. To a certain extent, we as politicians have to take the blame for some of the failures, because some of the policies were wrong and certainly some of the initiatives that we thrust on the staff were ill thought through. At no time has the Treasury Committee made extensive criticisms of the staff and their professionalism. Indeed, the reverse is true: the Committee has been complimentary.
	If we know that the existing staffing structures and levels work effectivelyindeed, provide a world-class servicewe need to be careful when we seek to adjust, review, revise or change those structures. Anyone who has gone through a merger, in the public or private sector, will know what turbulence it can cause in an organisation. Mergers can lead to breakdowns in efficient delivery of services. My anxiety about the proposals is that it is almost impossible to judge from the information that we have been given about staffing whether the proposals will be effective.

David Laws: I am not sure whether the hon. Gentleman was in his place earlier when the Paymaster General acknowledged that the reduction of 3,200 in staff numbers as a consequence of the merger was a guessit does not come from a precise analysis but from examining how such mergers have been managed in the past. Does he think that it is sensible to produce such numbers, which are very sensitive for those people affected, in such a manner?

John McDonnell: We can always rely on my right hon. Friend the Paymaster for her integrity and honesty. She gives straightforward answers to questions and, although I missed that part of the debate, her response does not surprise me. Indeed, that was the flavour of the discussion in the Treasury Committee and it is contained in the report. At different times, we have had different figures. The overall number of staff savings has been a moveable feast, and that is an issue not only for this merger, but for Gershon.
	I have some anxiety about this proposalnot in principle, because the merger may prove to be successful. My concern is that if the merger takes place with a predicted number of more than 3,000 job cuts, without detailed information on how the organisation will work, posts may be cut that will be needed later. It might be that we rely on some of the Gershon proposals for savings, especially in relation to the introduction of information technology, but Members on both sides of the House will have their own views on our past performance on IT contracts.
	I am concerned that we may lose a large number of professional staff on whom we have relied in the past. We are about to create turbulence within departments that will reduce efficiency of service delivery. We may lose some professionalism in the process, at some cost to us all. That may all happen just at the time we need to collect more revenue because of the taxation gap that has been identified. Is that the time to introduce instability into the system? I would have thought that rather than pluck a figure for job reductions out of the air, which then becomes a target, it would be better to plan the merger, develop the staffing structures, and bring the information back to the House. We should plan for investment in staff rather than reductions in staff.
	The evidence that the PCS provided to the Treasury Committee set out the objectives of the service effectively and showed a real commitment on the part of staff to make the process work. However, I would not like to see the merger driven through on the back of staff cuts in a way that alienates a dedicated staff. Should we alienate our employees at the same time as launching what some have described as an attackthe Government call it a reviewon other rights that they have had for a long time, especially their pensions?
	In the public sector, and in that particular part of it, we shall see the build up of a disgruntled staff who face job cuts and a review on reducing their pension entitlements, yet on whom we are putting an increased burden of tax collection due to the Government's overall fiscal problem with the taxation gap. Instead of a successful merger, we shall have produced something that will be counter-productive to everything that we all want to achieve on the efficient delivery of service.
	I am especially concerned about the loss of expertise. A managed merger of this sort must be handled extremely carefully. When we have undertaken such exercises in the pastnot just mergers but privatisations, toowe have found that it has taken, literally, a decade to overcome the loss of expertise. We debated the railway industry earlier this week. That is a classic example: the system was privatised, staff numbers were reduced and we lost the very experts on whom we should have relied to develop the new service we wanted to deliver.
	Staffing and personnel issues must be handled with incredible care. I cannot accept that blanket job cuts of 3,200 are rational at this stage, before we have even examined the merger and staffing structures in detail. At the end of the day, the cuts will prove counter-productive to the Government's overall policy of increasing tax collection and tackling tax avoidance.
	Many Members have mentioned the tax credits experience. As constituency MPs, we all highlight the need for a human being at the end of a telephone to explain benefits and the taxation system, rather than some impersonal computerised system. If the Bill goes through, we are about to lose 3,200 human beings who are desperately needed to explain the system and support our constituents; we should not be putting them on the dole queue where they, too, will have to claim some form of tax credit.
	There is support for the Bill, but not for the proposed post reductions. In future, when we consider Bills of this sort, we need much more detail, as a matter of course, about the staffing implications, rather than merely a sentence in the explanatory notes.

Teddy Taylor: I want to make some brief comments along the same lines as those of the hon. Member for Hayes and Harlington (John McDonnell).
	I interrupted the Paymaster General twice during her opening speech to ask about the employment implications of the changes. She courteously indicated that the figure was 3,200, and that was that.
	When I entered the House more than 40 years ago, I had great problems, like many MPs, about which party it was right to go along with. I had the impression then, which was right, that the Conservative party was the party of efficiency, which went for change and would look after public money carefully. From the financial point of view, it was probably the party that best served the interests of the community. On the other hand, there was no doubt that the Labour party was the party that cared for people and had more concern for them, and that influenced me. However, having listened to MPs over the years, there is no point in hiding the fact that what worries me now is the impression I have received from recent statements by Ministers, including the one we heard today, that the Labour party is forgetting its care for people.
	I live in Southend-on-Sea and meet many people who work there in one of the biggest Customs and Excise operationsour VAT office, which has a fine traditionso, in all sincerity, I can tell the Paymaster General that I know many of those people. I go to church with them, I go to meetings and dinners with them and they are very worried indeed about their future. Will they have jobs? Is the organisation to be changed dramatically? Will there be transfers to other places? That is a particular concern in a place such as Southend-on-Sea, which has traditionally had more unemployment than elsewhere in Essex and the south. The Paymaster General is a courteous and decent person, so I ask her, please, to realise the extent of the worry and concern that those major changes are causing.
	My second basic point is that all the efficiency changes made by the Government are not working terribly well for people. The one big change that we had in Southend-on-Sea was the closure of our social security office and the transfer of the work to Jobcentre Plus or to the new pensions office in Norwich. I can assure the Paymaster General that, whereas pensioners used to like visiting the office in Victoria avenue to talk someone about their problems and to ask for help to fill in their forms, they now face the nonsensical situation of making contact with Norwich.
	If the Paymaster General would like to phone that number herself, she would find out about all the nonsense involved in being switched from one place to another and hearing a voice that tells people what to do. In addition, the system is subject to long delays. Bearing in mind the number of people who have come to my surgeryI hold a weekly surgerythat is a horrible state of affairs for the pensioners, because they are not getting the same service and they are very distressed about that.
	I hope that the Paymaster General appreciates that the VAT office is one of the major sources of employment in Southend-on-Sea. We have only two major employers: one is called KeyMed and the other, of course, is the department. When an earlier proposal was made to transfer the office to another place, it was accepted that Southend had such a long-standing unemployment problem that some special measures should be taken for us.
	What are we trying to do? Of course, it would be easy to say, Let's scrap all these new plans and leave things as they are. That is difficult for the Conservative party, which works in the interests of efficiency. The Paymaster General should appreciate three things. First, it is desperately important that the local staff should be fully informed of what is happening, when it will happen and whether it will have a major impact on their employment. Secondly, facilities should be provided for meetings and discussions involving employees and trade unions. Frankly, unless that happens, people are simply being treated with contempt. Thirdly, the planned changes should take account of the fact that some areas have a tradition of high unemployment and special provision should be made for them.
	Although I would in no way suggest that the Paymaster General is a difficult person or is being unkind, I hope that she appreciate that there is sometimes a danger of forgetting people in the rush for efficiency and change. I also hope that she will appreciate that the people who work in that office are very worried indeed and that they are simply looking for some assurances.
	This issue was raised by the Treasury Committee, as the Paymaster General will probably know, and page 7 of the report that was made available today refers to a man called Mr. Varney, who is a Mr. Big in the organisation. He was asked what will happen if the redundancies take place. He was also asked whether the 9,000, 10,000 or 12,500 proposed staff cutsthe figures varythat result from spending review settlement will involve job losses. He replied that he could not rule out redundancies, but he would try to avoid them. Frankly, a married person buying a house with a mortgage, with two or three children at school, who is suddenly faced with the possibility of being made redundant does not have much to look forward to. If people are made redundant, I hope that the Government will go out of their way to try to ensure that they are offered advice about the alternatives or another form of employment.
	I can appreciate the Government's desire to move towards greater efficiency, but as a local MP, I do not particularly like it because I found from the other changes that people previously benefited from personal contact with individuals and that they do not like the fact that they have to contact a remote office in Norwich and must do so by phone and by pressing buttons. That is not an improvement in the service for local people, so I hope that the Government will accept that such changes do not necessarily provide better services. In fact, because of all the problems with computers, people may get a worse service. The main thing is, however, that the people themselves do not think that it is better. They think that it is much worse. I hope the Government also realise that for those who face the possibility of redundancy is it frightening, horrible and cruel. I hope that they will go out of their way to reassure people, in particular those in areas of Southend, where this civil service work is a desperately important part of our local economy.

Mark Francois: It is a pleasure to sum up for the Opposition after what has been a high-quality debate. I pay tribute to the Paymaster General. It is true that she spoke for nearly an hour, but the principal reason for that was that she was generous in giving way to hon. Members on both sides of the House. We should acknowledge her courtesy.
	I join my hon. Friend the Member for Chichester (Mr. Tyrie) in thanking the Paymaster General for kindly giving us a briefing on some of the detail of the Bill at the Treasury recently. We were grateful for that. We were also grateful for the whistle-stop tour, following the briefing, of the refurbished Treasury, but we resisted the temptation to pause and measure up the curtains. We felt that that might have appeared gauche. Nevertheless, it was kind of her to take us on the tour, which we enjoyed.
	In a thoughtful speech, my hon. Friend explained that we do not oppose the Bill in principle, because it is designed to facilitate the eventual merger of two large Government organisations. However, we are concerned about how the proposed merger is likely to take place in practice, and I shall concentrate on that in summing up our position.
	Before I do that, I want to refer to some of the contributions that we enjoyed. The hon. Member for Bexleyheath and Crayford (Mr. Beard), who served as a member of the Treasury Sub-Committee, spoke knowledgably on the subject. He provided us with some of the background to the proposed merger, including the genesis of the Butterfield report. We are grateful to him for adding that element to our deliberations.
	The hon. Member for Yeovil (Mr. Laws) spoke from the Liberal Democrat Front Bench. He, too, broadly welcomed the Bill, but like us expressed scepticism about the ability to generate material savings over the spending review period. There has been quite a lot of to and fro about that, so we would all welcome clarification of two things. First, what are the specific savings that the Department estimates will result from the merger itself? I am not talking about Gershon in the broader context, but how much public money will be saved as a result of the merger. Secondly, over what precise timetable do the Government expect those savings to be realised? In which year can we expect the full-year effect of those savings to have kicked in? If, for any reason, the Government cannot answer those two pertinent questions on Second Reading, they are in trouble from the word go. We look forward to the Economic Secretary clarifying those two points.
	The hon. Member for Luton, North (Mr. Hopkins) told us about discussions with his local trade unions relating to the merger, including during a recent visit to Luton airport. He amused the House with his valiant attempts to pay duty some years ago on his return from an enjoyable trip to France. As he mentioned consulting the unions, and as that sparked off a spat between the Paymaster General and the Liberal Democrats, perhaps the Economic Secretary will summarise what consultation has taken place with the unions to date, so that there is no confusion. Perhaps he could also say a few words about how the consultation process is likely to be taken forward with the trade unions as the merger rolls out. Given the comments that we have heard this evening, it seems that Members on both sides of the Chamber will be grateful for that clarification.

David Laws: I agree that we need answers on these points. I suggest that the hon. Gentleman might add a further question to the Economic Secretary. Given the vagueness about the figure of 3,200 job losses, perhaps the Economic Secretary can let us know whether, in his discussions with the unions, he will be clarifying with them whether the Government will seek 3,200 staff cuts or a figure close to that, or whether that is, as the Paymaster General indicated earlier, just a broad assessment or guesstimate of what the savings might turn out to be.

Mark Francois: That seems a pertinent point. Rather than repeat it for form's sake, I am sure that the Economic Secretary has heard it and will do his best to respond to it.
	My hon. Friend the Member for Sevenoaks (Mr. Fallon) chairs the Treasury Sub-Committee. We should pay tribute to the thorough and detailed job that that Committee did. On the basis of that work, he spoke knowledgeably about the proposed merger. He, too, argued for more specific information on the likely savings and how they are expected to be realised in practice. I hope that the Minister, having heard the Chairman of the Sub-Committee, has now well and truly got the message and that we will hear clear answers from him.
	My hon. Friend the Member for Hexham (Mr. Atkinson) has had something of a grin on his face ever since the result of the north-east referendum. I think that he still has that grin today, particularly when he was contemplating the taxpayer experience as some permanent exhibition. I do not know whether that will ever be established in practice, but if it were, I fear that it is the sort of thing that would have to be propped up with lottery money. The ticket sales might not meet the original estimates.
	My hon. Friend also talked about problems arising from the maladministration of tax credits. He made some pertinent points on the basis of the real experiences of real individuals. I shall return to that subject in more detail.
	We also heard from the hon. Member for Torridge and West Devon (Mr. Burnett). He brings to the House his experience as a tax practitioner over 25 years, I think. If I heard him correctly, he also said that, over those 25 years, he never had cause to lodge a material complaint about the Inland Revenue. I am not certain whether all our constituents could provide such a blanket guarantee but I echo what my hon. Friend the Member for Chichester said from the Opposition Front Bench, which is that we pay tribute to the sometimes difficult work that members of the Inland Revenue and Customs and Excise undertake. I emphasise that some of the criticisms that I shall come on to relate to their senior managers and to Ministers rather than to staff at the coal face who are doing the job from day to day.

John Burnett: I thank the hon. Gentleman for what he said. I think that I said that I had not had cause over 25 years to complain about the conduct of the Inland Revenue. I specifically said Inland Revenue. I had many disagreements with it, but its conduct was, in my view, beyond reproach.

Mark Francois: I am sure that the hon. Gentleman spent a lively 25 years in dealing with the gentlemen of the Inland Revenue. I am sure also that the House knew what he was driving at, and I wanted to acknowledge the point that he made.
	We then heard briefly from the hon. Member for Hayes and Harlington (John McDonnell), who raised the staffing implications of the merger. He made an important point on what is now becoming, in some respects, the impersonal nature of the system and the remoteness that many of our constituents feel when they have to deal with a call centre, especially when they cannot get through to the same person more than once. He introduced an important point and it is one to which I will return.
	We also heard from my hon. Friend the Member for Rochford and Southend, East (Sir Teddy Taylor), who is my parliamentary neighbour. He raised particular concern about the staffing implications of the merger. I can well understand that because Customs and Excise has a major facility in Southend. I already know from our informal discussions that he has made representations on this matter on several occasions, as I believe has my hon. Friend the Member for Southend, West (Mr. Amess). The issue affects Southend as a whole. The House will have heard what my hon. Friend the Member for Rochford and Southend, East said this evening on behalf of people in Southend. I hope that his points will be taken carefully into consideration as the merger proceeds.
	I also wish to refer to the remarks made by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley). He served with distinction on the Treasury Committee and was often a thorn in the side of Ministers. To a degree, he has achieved that in this debate. He spoke with particular force about the problems of information technology and how they cause difficulties for our constituents. I now turn to that subject.
	Given recent events, we have a strong concern about the risks that might arise from the IT aspects of the proposed merger. Between them, the Inland Revenue and Customs and Excise have about 250 different legacy computer systems and deal with 13 million customers, including 3.75 million businesses of varying sizes and complexity. The departments already experience more than 250 million contacts a year, ranging from tax returns, letters and telephone calls to e-mails. The scale of the merger in IT terms alone is therefore huge, as is the potential risk to the Government's revenue stream if it all went wrong.
	Unfortunately, even a brief examination of the Government's track record in managing major IT programmes is very far from encouraging. There are already serious problems at the Inland Revenue itself even before the merger commences and several hon. Members have touched on that issue already. The Revenue is now responsible for the administration of the Chancellor's complicated system of tax credits. The computer system designed for that purpose has been exposed as being prone to error, including a particularly unhelpful tendency to overpay tax credits to people in one year and then try to claw them back in the next. My hon. Friend the Members for Hexham and for North Wiltshire (Mr. Gray) made that point.
	The Public Accounts Committee, which examined the performance of the Inland Revenue in this respect, came to a damning conclusion. In a press release of 22 April 2004, the Committee's Chairman, my hon. Friend the Member for Gainsborough (Mr. Leigh), commented:
	The problems that arose when the Inland Revenue introduced the New Tax Credits scheme are well known. It was nothing short of disastrous, with hundreds of thousands of claimants not paid on time, inevitable hardship for some, inconvenience to employers, and disruption to other parts of the Revenue's business. The Revenue should have been more realistic in setting the timetable and have put in place better contingency arrangements.
	That is a sword of Damocles to hold over the Government's head.
	In facilitating the proposed merger, it will also be important to learn lessons from the recent problemssome of them very seriousat the Child Support Agency. By way of comparison, several years ago the Government decided to transfer CSA cases on to a new bespoke computer system known as CS2. The new computer cost almost 500 million of taxpayers' money but, according to an article on the BBC News website entitled appropriately, Basically, it doesn't work, operators could be working on the system when it would suddenly lock them out without warning. It would take weeks before the case file could be electronically reactivated and properly dealt with. According to a briefing note from the Library, up to 150,000 cases are now stuck in the CSA system in this way and are effectively unable to proceed.
	Ministers are still wrestling with whether to try to fix the existing system or write off a great deal of public money and start again with an alternative. This has been a fiasco, and it led to the resignation of the chief executive of the CSA. Such events must be avoided in the merger that we are discussing, particularly as the merged entity would have to deal not just with individuals but with companies.
	It is important to remember that we are not just dealing with statistics, even though some of the numbers for the problem cases involved are very large. I say in all sincerity to the Economic Secretary that these are real people, many of whom rely on receiving money for which they have budgeted in all good faith, but which fails to reach them through no fault of theirs.
	Commenting on the syndrome of Government computer failures, the National Audit Office, in its November report on improving IT procurement, a copy of which I have, concluded that the failure of public sector IT contracts is due to a number of key factors, including a lack of a clear link between the project and the organisation's key priorities, a lack of effective engagement with stakeholders who will need to use the system, and a lack of clear senior management and ministerial ownership and leadership. That is a damning indictment from the NAO, in addition to the previous one from the PAC.
	As the merger is implemented, it will be important to try to avert what might be described as ordeal by Government call centre. Too many of our constituents experience a substandard service because the Government switch work into call centres backed up by inefficient or unreliable computer systems. The syndrome, which is all too familiar to many CSA and Inland Revenue tax credit customers, can be summarised as follows.
	The Department's computer generates a letter that is incorrect on an account that was previously operating well. The aggrieved constituent telephones the number on the letter and is put through to a departmental call centre. After the electronic rendition of Greensleeves or whatever the music happens to be, they get the inevitable menu of options. Having fought their way through that, they are eventually put through to a member of staff. They give their reference number and the details, and attempt to explain the specifics of their case. That is all taken down and the caller is told something like, I will send an e-mail to our computing department and have it sorted out for you. Don't worry.
	Two or three weeks later the constituent receives another letter showing that nothing has happened and nothing has changed. Frustrated, they ring up the call centre again, are put through to a different person and go through the whole saga a second time, only to discover a fortnight or so later that again the problem has not been put right. The problems with tax credits and overpayments are a perfect example of the syndrome. Eventually, in a state of high dudgeon, the constituent arrives at their Member of Parliament's constituency surgery to vent their wrath. I am sure a number of hon. Members have had that wonderful experience already.

Mark Hoban: My hon. Friend is outlining a problem that many constituents have experienced. Constituents of mine have been advised by the person at the call centre to ring their MP, as that is the quickest way to get their problem resolved. That demonstrates the problems that constituents face with the computer systems already in place, dealing with the CSA and tax credits. The Paymaster General shakes her head, but that is a common concern that constituents raise with me. They are told that the MP is there to sort things out.

Mark Francois: I thank my hon. Friend for that pertinent intervention. I did not intend to mention individual constituency cases, but I, too, have had people who have come to see me at my constituency surgery because someone at a call centre has advised them that the only way they will get their problem sorted out is to see their Member of Parliament.
	In fairness to the Minister, it appears to be the Child Support Agency that is the worst offender, but the Inland Revenue is not far behind with its maladministration of tax credits. I know that Ministers do not like to hear it, but that is stark reality.

Dawn Primarolo: indicated dissent.

Mark Francois: I remind the Minister that the system is supposed to help people and provide them with value for money, not to drive them mad. We must do better than we are doing at present. People out there deserve better than they are getting from people in here. I cannot stress that strongly enough to the Minister.
	In conclusion, we are not opposed to the Bill per se, but we are concerned about how its provisions will be implemented. Specifically, we are worried about the degree of risk inherent in the information technology aspects of the merger, given that the new system will be expected to handle more than 250 million contacts in any one year. Were there to be another foul-up on the scale of the Child Support Agency, the threat is not just that it would cause widespread confusion among the taxpayer and business community, as it undoubtedly would do, but that the Government's revenue stream would start to dry up as a result.
	For this merger, we will need a combined system that provides a high-quality service to both taxpayers and companies and ensures that they receive genuine value for money in return for the considerable capital costs that are likely to be involved. Crucially, we need evidence of clear ownership and leadership by Ministers. When that falls to future Ministers in a Conservative Government, we will endeavour to provide it.

John Healey: This has been a full debate, and I shall try to do full justice to the detailed contributions made by nine hon. Members from both sides of the House since my right hon. Friend the Paymaster General opened it earlier this afternoon.
	The Bill is important and will bring important changes. It concerns the machinery of government, but it matters to 30 million HMRC customers, including 4 million businesses around Britain. It enables the early steps in bringing together the Inland Revenue and Customs and Excisefull integration is a long-term, large-scale undertaking. As my right hon. Friend said, the process goes beyond a simple merger between two departments.
	Between them, the two departments collect 400 billion in revenue each year. They pay out 17 billion in tax credits and a further 9 billion in child benefit, and they handle almost 40 million telephone contacts. The two departments employ 100,000 staff, operate from more than 300 locations, run 250 separate IT systems and carry out a wide range of functions from traditional tax gathering and assurance to enforcement of the minimum wage, payment of tax credits, facilitating British exports and securing the UK's frontiers. Between them, Customs and the Revenue have a proud history of more than 1,000 years' service to the British state and the British people. I pay tribute to their professionalism, their technical expertise and their commitment to the public service ethos, which have been the special hallmarks of both departments over the years.
	Some have questioned the case for integration. Earlier this year, Gus O'Donnell, the permanent secretary at the Treasury, produced the O'Donnell report, which examined not only the case for integration but a couple of other options not involving integration. It set out the clearest conclusions on the case for integration, and I refer hon. Members on both sides of the House to page 6:
	The case for organisational change rests on potential improvements in customer service, effectiveness and efficiency. It results from an analysis of
	*
	international experience, which has shown that the current separation of direct and indirect taxes in the UK, as opposed to organising around functions and customers, is behind best practice;
	*
	the functions of the revenue departments, which shows that there are benefits from bringing them closer together;
	*
	the experience of closer working between the departments since 1994, which has been promising but limited in its results; and
	*
	the success of the creation of the Department for Work and Pensions, with the formation of several customer-oriented agencies, including the integration of benefits and employment advice in Jobcentre Plus.
	The Treasury Committee has been in no doubt about the sense in creating a single Revenue department. I, like others, pay tribute to the hon. Member for Sevenoaks (Mr. Fallon), who led the work on the recent report, and to his colleagues, both past and present, who have contributed to this afternoon's debate. Last month, the Sub-Committee produced its report, which welcomed the decision to merge the two departments and reminded us, as the hon. Member for Sevenoaks did this afternoon, that the Treasury Committee, under different chairmanship, recommended a merger in 2000.
	The Sub-Committee observed that witnesses believe that the merger should produce benefits for both taxpayers and the Government. It endorsed what the Government saw as the pragmatic approach adopted in this initial Bill to create HMRC, which will be followed by further work. Finally, although this is not related to the Bill, the Committee endorsed steps to strengthen the Treasury's capability in the area of strategic tax policy making.
	In that respect, the Committee was reporting afresh on an issue that was first examined by one of its predecessor Committees in 1863, although that Committee published two reports that year which came to exactly opposite conclusions on amalgamation. The Committee chaired by the hon. Member for Sevenoaks has had no such second thoughts. Indeed, it made recommendations to the Government about proceeding on integration. It made further recommendations on quantifying the expected costs and benefits; on ensuring that business as usual is a top priority during the merger period; on proper parliamentary scrutiny, including a second stage of legislation for any substantive changes; and on safeguarding the confidentiality of taxpayer information. My right hon. Friend the Paymaster General explained that we have taken those recommendations into account in framing the Bill, and she set out the Government's point-by-point response to them.
	I shall try to do justice to the very detailed contributions that hon. Members made to the debate, starting, if I may, with the hon. Member for Chichester (Mr. Tyrie). He said that as a country we are very lucky in our Revenue departments; we would share that sentiment. He said that he worked with both departments in the 1980s; I fear that he may have to wait for a little longer than a few months until he gets the chance to do so again. He mapped out the rationale for integration and quoted a section of the O'Donnell review, which summarised the principal benefits on page 7 of its report.

Andrew Tyrie: Will the Minister give way?

John Healey: So soon? By all means.

Andrew Tyrie: I also pointed out that the Government have not provided the quantification of those benefits that is necessary in taking this decision, and that the project has real downside risks whereby if it goes wrong it could be very costly for the country in terms of lost yield. I would not want the Minister to paint a picture suggesting that we are giving unalloyed and unqualified support to the merger.

John Healey: The hon. Gentleman did indeed make a substantial contribution to the debate. If he will be patient, I propose to move on immediately to his point about costs and benefits, then to deal with the concerns that he expressed about IT, as one of at least six of his points that I intend to respond to directly.
	The hon. Gentleman mentioned cost-benefit analysis of integration, as did the hon. Members for Yeovil (Mr. Laws), for Sevenoaks and for Hexham (Mr. Atkinson). All did so in the context of being generally favourable to the plan to integrate the two departments. Essentially, their questions concerned detailed cost-benefit analysis of full integration. Let me try to explain the situation. A change management centre has been set up for the departments with the specific role of identifying and tracing the benefits that may flow from integration. As part of that, it will ensure that all proposals for bringing work together are tested to identify the benefits that they deliver and to establish proper priorities for the integration work. Of course, the National Audit Office will subject the new department to scrutiny and monitoring on efficiency and effectiveness, just as in the case of its predecessors; and any legislation on reforms that are required will be accompanied by a regulatory impact assessment that will spell out the anticipated costs and benefits.
	I remind the hon. Member for Chichester that, as my right hon. Friend the Paymaster General said, until this House gives the Bill its Second Reading, the departments do not have the legal authority to spend money to analyse and model the options in sufficient detail to quantify the costs and benefits that can flow from integration in the way that he seeks. Clause 38 provides for expenditure by HMRC in carrying out all its functions.

Andrew Tyrie: Does the Economic Secretary seriously suggest that we do not have figures from the Government on costs and benefits because of some legal bar to their beginning the preliminary work?

John Healey: There is no ducking the fact that there is a legal bar until the HMRC is closer to being formally constituted. There is a bar on deploying resources. It is obvious that, until more detailed plans are worked out about how integration can be effected to secure the general purposes and gains that the O'Donnell review sets out, it is not possible to quantify the costs and the benefits precisely. I shall shortly spell out the costs and benefits analysis that we were able to set out in the regulatory impact assessment that accompanies the Bill.

Mark Francois: I thank the Economic Secretary for his courtesy. The NAO report on IT procurement that I mentioned in my speech contains a list of recommendations to the Government from Sir Peter Gershon from the time that he spent at the Office of Government Commerce. One recommendation, on page 3 of the executive summary of the report, states:
	No government initiative (including legislation) dependent on new IT to be announced before analysis of risks and implementation options has been undertaken.
	How does he square that with his comments?

John Healey: I shall deal with IT, if the hon. Gentleman, like the hon. Member for Chichester, will be patient. Let us be clear: the Bill and the changes for which it provides do not directly depend on changes and integration in IT.
	The regulatory impact assessment confirms the figure of 3,200 for staff savings as a direct benefit and gain of the integration of the two departments. Her Majesty's Revenue and Customs is committed to delivering those figures from integration as part of its efficiency plan up to 200708. Let me be clear and direct: the savings from those 3,200 posts, including the associated overheads, could be 100 million of a total of 507 million that the department will save by 200708. Those are Gershon savings.

Andrew Tyrie: Are they to do with the merger?

John Healey: They are indeed, but they are not entirely dependent on it.

Andrew Tyrie: rose

John Healey: I am sorry but I need to explain the point to the hon. Gentleman again. The staff savings that flow directly from integration are set at 3,200HMRC has signed up to deliver that target by the end of 200708. The costs of those posts plus the associated overheads could be approximately 100 million. That is part of a total saving, set at 507 million, that the department will achieve by the end of 200708. They are Gershon savings and include additional savings on posts through integration. Those efficiency savings will save at least 507 million by the end of 200708. Hon. Members should not regard that as new information, because in September a 16-page note, entitled HMRC Efficiency Technical Note was produced on the department's efficiency plan. Hon. Members will find plenty of information in that publication that they do not seem to have.

David Laws: The Economic Secretary says that the information is available. It did not appear to be available to the Paymaster General earlier. I am grateful that he has corrected her comment that the 500 million savings were down to the merger. Will he clearly answer two other questions? He said that the figure of 3,200 was a target for job cuts that had been signed up to. However, the Paymaster General admitted earlier that the figure was a guesstimate of savings. Is it appropriate to sign up to a target of 3,200 job reductions on the basis of a guesstimate? Will there be any net savings from the Bill in the period of the existing spending review?

John Healey: The existing spending review is entirely consistent with the period that I have just outlined, to 200708. The savings involved will flow from the posts. The hon. Gentleman has failed to see what has been going on in other Departments as part of the general efficiency drive in Government. This is precisely the nature of the targets that have been set and signed up to. Department by Department, senior managers and Ministers are examining how they can be realised. There is nothing different about this stage of the process for HMRC.

Andrew Tyrie: rose

John Healey: I am going to make some progress, if I may. I want to move on to a point that the hon. Gentleman raised earlier, and which was also mentioned by the hon. Members for Sevenoaks and for Yeovil. The provisions in the Bill are not a downgrading of the Inland Revenue oath, as the hon. Member for Sevenoaks tried to argue. The statutory duty set out in clause 17 places the staff of HMRC under the same strict obligations as the Inland Revenue oath does, but in a modern guise. Protecting customer confidentiality will remain an essential characteristic of the new department, as my right hon. Friend the Paymaster General spelled out earlier, and all staff will continue to take their obligations on confidentiality extremely seriously.

John McFall: I would like to pay tribute to my colleague, the Chairman of the Sub-Committee, the hon. Member for Sevenoaks, for his work on this inquiry. It was a very productive inquiry: the fact that Customs and Excise and the Committee worked together was very good, and the fact that the Treasury has taken up our suggestion is very welcome. Confidentiality was a concern for us, however. Will the Minister assure us that he will ensure the confidentiality of each department, and that that will be in the Bill?

John Healey: I can give my right hon. Friend that assurance; it is indeed in the Bill.

Michael Fallon: The Minister has not quite reassured me on the specific point as to whether the statutory declaration will continue to be practised. Is it to be wrapped up inside the employment contract, or will members of the service still make the statutory declaration in front of a witness when they join?

John Healey: The staff will have a statutory duty, which will be binding on them, regardless of what they have already signed. As my right hon. Friend the Paymaster General said, the statutory duty set out in the Bill replaces the Inland Revenue oath and for the first time extends it across former Customs and Excise matters, giving statutory backing to existing duties of confidentiality under employment contracts across a wider range of functions.
	The hon. Member for Chichester raised the question of information technology, as did the hon. Members for Rayleigh (Mr. Francois) and for Bury St. Edmunds (Mr. Ruffley). The Paymaster General and I know only too well how central information and communications technology is to the delivery of the essential functions of both revenue departments. As we look forward to their integration and to the formation of HMRC, we are creating a single chief information office which will bring together the planning for both organisations. I want to make it clear that HMRC will not have a single operating environment. Both departments have many systems at present, a number of which are stand-alone systems that are likely to remain so under HMRC. As Members would expect, detailed contingency plans and disaster recovery arrangements are already in place, together with strategic sites for back-up. However, I do not accept the argument of the hon. Member for Chichester that it would be appropriate to publish that information.
	I am grateful to the hon. Member for Yeovil for his general support for the change that we are proposing. He says that he can see the potential benefits of integrating the departments, as we can, and he came to the same conclusion as the Treasury Committee that gains were more likely to come from integration than from the further closer working of the two independent departments. He outlined the three principal objectives involved: the further closing of the tax gaps; the provision of a better service to business and individual customers; and the efficiencies that can be gained. I say to him that the focus is certainly not only on the efficiency savings that could come from integration, although it is true to say that, on Budget day, when the integration was confirmed, the focus of the media was very much on those savings. The lengthy O'Donnell report, the policy and plans in place in both departments to improve services to taxpayers, and the public service targets that are set for HMRC to continue to reduce tax gaps, will all, I hope, reassure him that this is not a merger that will be driven by efficiency savings alone.

David Laws: rose

John Healey: I will give way one last time. I am sure that other Members who have contributed to the debate would like me to be able to answer their points as well.

David Laws: I am grateful to the Economic Secretary for giving way. I remind him that he has almost two hours in which to respond, so there is no particular hurry. I have accepted that we will not get an answer from him on the issue of net cost, but does he really think that setting an arbitrary target for job reductions of 3,200 for this merger, which we now understand is based only on a guesstimate from other mergers, is the right way to get the support of the staff for the significant changes that he has discussed today?

John Healey: It is not an arbitrary targetit is a realistic target. What has been done for HMRC is exactly what has been done and is being pursued in other departments.
	My hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard), who has served for some time with distinction on the Treasury Committee, urged us not to lose sight of the wood for the trees. Like the hon. Member for Yeovil, he stressed the main concern, which should be to close the tax gap, as he put it, and reduce it almost to the point of elimination of evasion. I want to underline that HMRC has public service targets set throughout the current spending review period and throughout the period of the initial stages of integration, which cover reducing the amounts of unpaid VAT to the Exchequer and reducing the underpayment of direct taxes.
	My hon. Friend the Member for Bexleyheath and Crayford also gave some indication of the potential gains for business: a single inspector; single inspection visits; and a single point of contact. I am sure that he looks forward to the publication, which my right hon. Friend the Paymaster General mentioned, of the consultation paper on further steps and changes in powers in January. We look forward to his views and those of the Treasury Committee as part of that consultation. He was also concerned that integration should not distract the departments from their continuing duties. The Treasury Committee was right to stress that, and Ministers have made that clear to the new chairman, David Varney, who has certainly made it clear to his staff that that cannot be the case.
	The hon. Member for Sevenoaks asked why the Government have changed their mind since 2000, which was a point echoed by the hon. Member for Bury St. Edmunds. It is less that we have changed our mind than that we have undertaken a serious study, led by the permanent secretary to the Treasury, which gives us a better basis as Ministers to take such a decision to move to integration. It is also based on a couple more years of experience in government of such large-scale mergers than when the Committee first took evidence and produced its report. I welcome the second report from his Committee, as I have made clear, and its conclusions.
	The Committee urged us to treat this as a staged process, and to evolve the new department rather than to do it in one go, although, curiously, the hon. Members for Sevenoaks and for Hexham then started raising concerns about the second stage of the process. I hope that the former will be reassured by confirmation that the consultation on this second stage will begin in January, and that it is clear to him that we do not expect that to be completed in time for the setting up of the new department under this Bill. My right hon. Friend the Paymaster General has made it clear that we regard the Finance Bill in 2006, or appropriate legislation, as the likely timing for introduction of the succeeding stage. Of course, we will delay no longer than necessary, as to do so would be to delay gaining the benefits that we set out to achieve from integration.
	On the concern raised about geographic location and the move of Customs and Revenue staff to Parliament streetI will come on to the similar point made by the hon. Member for Torridge and West Devon (Mr. Burnett) in a momentlocation is not an issue. The existing convention whereby Ministers and their officials do not intervene in individual cases will be strictly maintained. As now, Ministers and their officials will not have access to individual taxpayer and customer information in the Treasury.
	The hon. Member for Torridge and West Devon asked where the new RCPO staff would be housed. They will have two offices, one at New King's Beam house in London and one at Ralli Quays in Manchester. They will share those larger Government buildings with some HMRC staff and some staff from other Departments. However, the respective operational areas will be quite distinct. RCPO staff will report directly to their new director, who will be accountable to the Attorney-General and not to Treasury Ministers.
	The hon. Gentleman asked about the extra staff in the Customs and Excise Prosecutions Office since the line of accountability led to the Attorney-General rather than Treasury Ministers. The new arrangement is settling down, as he said, and the numbers have also been settled: there are just over 200 staff. The hon. Gentleman also asked about resources for the extension of the functions of the IPCC to the new HMRC. They are still being agreed, and for reasons that he will understand I cannot yet give him a definite answer. He asked about confidentiality, the principle of new powers, the quality and nature of investigators' training post-Butterfield and the external scrutiny that we deem necessary for investigators post-Butterfield. I look forward to discussing and probing those matters with the hon. Gentleman in Committee.
	I will pass on the tributes paid by my hon. Friend the Member for Luton, North (Mr. Hopkins) to the excellent job done by Customs and Revenue staff. He urged us to be prepared to invest in, among other things, more staff when there is a case for doing so, and my hon. Friend the Member for Hayes and Harlington (John McDonnell) mentioned what he described as our spend to raise programmes. What we have done in the past has had an impact on the VAT gap, and helped to close the gap in the collection of tobacco excise duties. I was a little concerned when my hon. Friend was reciting his experiences at the port, until he explained that they had happened 15 years ago. He will recall that one of our first moves when we came to office in 1997 was to cancel the Conservatives' planned cut of 300 Customs posts.

David Taylor: Will the Minister give way?

John Healey: My hon. Friend is a great friend of mine, but he has only just come in, and I want to respond to points made by those who have been present and contributed to the debate.
	I pay tribute to the work of my hon. Friend the Member for Hayes and Harlington as chair of the all-party PCS trade union group, which is one of the most active all-party groups in Parliament at present. He spoke of the improvement in the information that we publish with Bills, but felt that details of staffing changes were still not full enough. As I said earlier, the aim is to cut 3,200 posts as a direct result of integration. That has been signed up to as part of the efficiency plan for the new department, to be delivered by the end of 200708.

Andrew Tyrie: Will the Minister give way?

John Healey: No, I will not. I want to finish my response to my hon. Friend the Member for Hayes and Harlington. He will know of the opportunities we are providing; of the redeployment and reskilling of staff affected by the cut in the number of posts; and of our determination to avoid compulsory redundancies whenever we can; and he will know that plans for the development of the new department, and plans for efficiency savings, are being fully discussed with the trade unions.

Andrew Tyrie: Will the Minister give way?

John Healey: The hon. Member for Rochford and Southend, East (Sir Teddy Taylor) asked

Andrew Tyrie: rose

Madam Deputy Speaker: Order. It is obvious that the Minister is not prepared to give way at this point.

John Healey: The hon. Member for Rochford and Southend, East waited patiently to make his contribution, and is still in his place. Understandably, he is worried about the employment implications of a number of changes affecting Customs and Excise, and not just its integration with the Inland Revenue. I appreciate the concern that he feels as a diligent constituency MP, and I certainly appreciate the uncertainty felt by the staff. I hope that the reassurances that I gave to my hon. Friend the Member for Hayes and Harlington will also help to reassure the hon. Gentleman and his constituents. Any changes will be fully discussed with the trade unions and with the staff affected. Ministers and senior managers are very conscious of the need to settle the precise plans and the implications for particular posts as soon as possible. As my hon. Friend asked, neither Ministers nor senior managers will forget the people in the departments in making these changes, because they remain at the very heart of everything that we do.
	The Paymaster General and I were encouraged by the broad support that we received for the Bill in all parts of the House this afternoon, and we both believe it right that detailed scrutiny should take place in Committee. I should make it clear that, as the Treasury Committee advised and as Members have urged today, we cannot proceed without this legislation. The Bill legally establishes HMRC. It allows it to spend money in carrying out its functions, to deploy resources more flexibly on single visits and returns, and to pool information that Customs and Revenue officials currently cannot share. Although it is currently possible to achieve a good deal of close working and joint activity, a single Revenue department structure and management will indeed bring better strategic focus and benefits to all the department's customers. It will help to tackle the tax gap, to reduce costs for honest taxpayers, and to enable much more coherent and integrated future developments.
	Beyond creating a single new department, we have also taken the opportunity provided by the Bill to establish a new and fully independent prosecutions officethe Revenue and Customs Prosecutions Officeand to extend the remits of Her Majesty's inspectorate of constabulary and the Independent Police Complaints Commission. Together, they will provide the extra, external scrutiny of HMRC's criminal investigation work that is a direct consequence of accepting and putting into practice the Butterfield review's recommendations.
	In summary, the Bill allows for the legal establishment of HMRC. It confirms the transfer of existing powers for the administration of tax and duty regimes, not their extension. It reinforces the principle of, and protection of, taxpayer confidentiality. It strengthens the independent scrutiny and inspection of criminal investigations work. It sets up a new prosecutions office that is fully independent of HMRC, and will report directly to the Attorney-General. I commend the Bill to the House.
	Question put and agreed to.
	Bill accordingly read a Second time.

COMMISSIONERS FOR REVENUE AND CUSTOMS BILL (PROGRAMME)

Motion made, and Question put forthwith, pursuant to Standing Order No. 83A (6),
	That the following provisions shall apply to the Commissioners for Revenue and Customs Bill:
	Committal
	1.   The Bill shall be committed to a Standing Committee.
	Proceedings in Standing Committee
	2.   Proceedings in the Standing Committee shall (so far as not previously concluded) be brought to a conclusion on 13th January 2005.
	3.   The Standing Committee shall have leave to sit twice on the first day on which it meets.
	Consideration and Third Reading
	4.   Proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
	5.   Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on the day on which proceedings on consideration are commenced.
	6.   Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.
	Other proceedings
	7.   Any other proceedings on the Bill (including any proceedings on consideration of Lords amendments or on any further message from the Lords) may be programmed. [Mr. Heppell.]
	The House divided: Ayes 332, Noes 147.

Question accordingly agreed to.

COMMISSIONERS FOR REVENUE AND CUSTOMS BILL [MONEY]

Queen's recommendation having been signified
	Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a) (Money resolutions and ways and means resolutions in connection with Bills),
	That for the purposes of any Act resulting from the Commissioners for Revenue and Customs Bill it is expedient to authorise
	(1)   the payment out of money provided by Parliament of 
	  (a)   expenditure of the Commissioners for Her Majesty's Revenue and Customs,
	  (b)   payments to or in respect of the Commissioners or their staff,
	  (c)   rewards,
	  (d)   expenditure of the Director of Revenue and Customs Prosecutions,
	  (e)   payments to or in respect of the Director of Revenue and Customs Prosecutions,
	  (f)   payments to or in respect of Her Majesty's Inspectors of Constabulary,
	  (g)   payments to or in respect of the Independent Police Complaints Commission, and
	  (h)   any increase attributable to the Act in sums payable out of money provided by Parliament under any other enactment,
	(2)   payments out of the Consolidated Fund to enable the Commissioners to make payments or disbursements, and
	(3)   the payment of sums into the Consolidated Fund. [Mr. Heppell.]

DELEGATED LEGISLATION

Income Tax

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
	That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Georgia) Order 2004 be made in the form of the draft laid before this House on 17th November, in the last Session of Parliament.[Mr. Heppell.]
	Question agreed to.

John Gummer: On a point of order, Mr. Deputy Speaker. Have you received a request from the Secretary of State for Environment, Food and Rural Affairs to give an oral report about the two documents published today? She appeared on television and answered a large number of questions from journalists, but no one in the House is able to question her about the fact that we shall meet neither our Kyoto targets nor the 20 per cent. target set by the Government. Today, it has been announced that 43 per cent. of new homes have broken the regulations that she laid down to ensure that they were energy efficient. Surely, the issue should be debated in the House and not on the television and radio.

Michael Jack: Further to that point of order, Mr. Deputy Speaker. As Mr. Speaker is always keen that Departments make important announcements to the House first, may I ask you, Mr. Deputy Speaker, to investigate why on this occasion a very important result in terms of our climate change programme was released to the media first, and not to the House? Secondly, could you investigate the delays that I encountered today in getting hold of the relevant documents to understand precisely the terms of the announcement that had been made?

Mr. Deputy Speaker: The first answerto the right hon. Member for Suffolk, Coastal (Mr. Gummer)is that I have received no request from a Minister to make a statement. The House will know that it is up to the Government to decide how they make information available to the House. That is a matter of judgment, and from time to time there will be differences of view about how that judgment is exercised; it is a matter for the Government in each case.
	I understand that the documents are available to Members, but if there has been a delay I will certainly ensure that it is investigated.

Andrew Murrison: On a point of order, Mr. Deputy Speaker. In a reply given during Health questions yesterday by the Minister of State, Department of Health, the hon. Member for Doncaster, Central (Ms Winterton), on the new dental contract, the hon. Lady suggested that negotiations with the British Dental Association were going reasonably well, yet within hours of her making those comments the British Dental Association withdrew. The hon. Lady had plenty of opportunity during subsequent supplementary questionsnot least from meto correct that erroneous impression. Given the collapse of the talks between the BDA and the Government, would it be in order for the Minister to come to the House to correct the erroneous impression she made?

Mr. Deputy Speaker: It would certainly be in order, but it is entirely up to the Minister whether that opportunity is taken. I am sure that opportunities are open to the hon. Gentleman, or his colleagues, to pursue the matter if that is what they wish to do.

PETITION
	  
	Care Homes

Jeff Ennis: I wish to present a petition on behalf of my constituent, Mr. Eddie Gardner, and well over 3,500 residents of Mexborough in my constituency.
	The petition states:
	To the House of Commons.
	The Petition of residents of Mexborough,
	Declares that the proposed use of former care homes on Manvers Road, Mexborough, as a hospital for people with mental illnesses is unacceptable because Cambian Healthcare has failed to communicate with local people during the early stages of the project leading to confusion about its purpose, fear about its suitability and lack of trust in the company.
	The Petitioners therefore request that the House of Commons urge the Government to commission an independent review of Cambian Healthcare's proposal.
	And the Petitioners remain, etc.
	To lie upon the Table.

EYE TREATMENT

Motion made, and Question proposed, That this House do now adjourn.[Joan Ryan.]

Norman Baker: I am pleased in one way at least to have the opportunity to raise in the House this evening a very sad case that involves one of my constituents. I want to do the best that I can for my constituent, and I hope that, when the Minister replies, he will be able to give him hope about the way forward to try to deal with his very difficult health condition.
	My constituent, Mr. Adrian Patrick, lives in Newhaven. He is a relatively young manhe is only 31and he has been a chef by profession, but he now cannot work because, sadly, he is going blind, which is a tragedy at that age. That is sad, but it is also a matter of anger, however, because the means to keep his sight may be available but its use is being blocked by, of all people, the management of Moorfields Eye hospital.
	Mr. Patrick suffers from a condition that is a form of uveitis, which essentially attacks the jelly between the eyeball and the retina, causing a disconnection. Although the erosion is gradual, the effect can be sudden. Such a disconnection can be triggered by something as simple as the individual who is affected bending his or her head in the shower. One eye has already gone, and the race must now be on to save Mr. Patrick's remaining eye. Such is his condition that he is already eligible for blind registration.
	I want to run through the chronology of the key events. Mr. Patrick contacted me for the first time on 6 August 2003, when he told me that his consultant, Professor Susan Lightman at Moorfields had, since November 2002, wanted to prescribe for him a certain drug, infliximab, to try to help his eye condition but was being prevented from doing so. I wrote on that same day to the local PCT in Lewesthe Sussex Downs and Weald primary care trustto raise the matter with it, based on the fact that the PCT had been contacted directly by Professor Lightman but had refused to fund the treatment.
	The position that the PCT has takenit is a difficult one for itis, as I shall explain, to try to mediate between the different elements of Moorfields Eye hospital. In the response to me on 26 September 2003, the PCT's chief executive, Fiona Henniker, wrote:
	It is not normal practice for a hospital doctor to approach a commissioner direct to ask for money above and beyond the sum already agreed in the service level agreement.
	So the PCT wanted approval from Moorfields direct, rather than simply an application from my constituent's consultant. I raise that issue now because it is relevant, as I shall explain later, in respect of a letter that I received from one of the Minister's colleagues, Lord Warner, in considering this matter.
	The PCT's position was not normal practice, and one of the questions that I want the Minister to clarify I hope that he is able to do sois the exact relationship between the three elements of the triangle in this sad saga: first, the PCT, the commissioning body in normal circumstances; secondly, the management at Moorfields hospital; and, thirdly, the consultant.
	Is it possible for a consultant to secure funds from a PCT if the consultant believes that the release of those funds is appropriate and the PCT is happy to do so; or must the PCT always have approval from the management of the hospital where the consultant works? Despite a year and a half of looking into the case, I am still not entirely clear about the legal position in respect of that matter. If the Minister can clarify that in his remarks, I should be grateful. According to the PCT, Professor Lightman subsequently presented a protocol to the drugs committee at Moorfields on the use of the drug infliximab, but that was rejected.
	The letter that Professor Susan Lightman wrote to the commissioning manager of my local PCT on 7 February 2003 is relevant to the history of the case. She gave evidence to the fact that infliximab helps uveitis and enclosed several abstracts which suggested that that was the case. So at an early stage, the consultant supplied evidence that the drug could be effective in dealing with the condition.
	At the end of a long exchange of correspondence between Moorfields and my PCT, a reply was received from the Adur, Arun and Worthing PCT. My PCT had felt that it should not be deciding the matter and it had been referred to a specialist funding panel. In fact, there was a process error involving my PCT, which took some months to come to light, and that caused a further delay for my constituent.
	The reply from the Adur, Arun and Worthing PCT, acting on behalf of my PCT, said:
	My response to the request
	for funding
	is that we have a fully inclusive agreement with your Trust
	the Moorfields Eye hospital trust
	to cover the treatment of patients registered with Sussex GPs . . . It is therefore not appropriate for clinical departments to make direct approaches for additional funds. I would like to make it clear that my response is based purely on our contractual arrangements. It does not imply agreement or disagreement to the use of an unlicensed drug for your patient.
	In other words, both PCTs have taken the position that they do not want to intervene in whether the drug is used, but to leave it to the management at Moorfields to arrive at a conclusion with the consultant at Moorfields. I shall demonstrate that it has been impossible to reach such a conclusion because the consultant and management have been at variance throughout the process. In the meantime, of course, my constituent is going slowly blind.
	I received a reply from Sussex Downs and Weald PCT to my next letter on 13 January 2004. It again reiterated its position. That letter, also from Fiona Henniker, stated:
	This matter is very much an internal one for Moorfields NHS Trust. Unfortunately, Mr. Patrick is the subject of a difference of opinion within Moorfields NHS Trust about how new drugs should be introduced. Moorfields NHS trust has not asked
	the PCT
	to fund treatment for Mr. Patrick.
	At this stage, cost is not an issue. The problem appears to be the suitability or otherwise of the drug. The PCT quoted an extract from the letter that Moorfields sent to it, which stresses that the only issue is whether the drug is appropriate.
	However, the PCT conceded in the letter:
	we do on occasions fund patients who are having unproven treatments, if we are satisfied that this will provide good quality evidence to help in the evaluation of a potential new service.
	So, first, the position appears to be that the PCT is prepared to fund unproven treatments and, secondly, there appears to be a situation in which the PCT would agree to fund a consultant, even if the consultant's own trust is not willing for that arrangement to take place. That is where the confusion lies. Again, it comes back to the triangular nature of the arrangements between the three participantsmy PCT, the Moorfields trust and the consultant who works for that trust.
	Given the uncertainty with the PCT, I wrote directly on 23 January to the chief executive of Moorfields Eye hospital, Mr. Ian Balmer. In my letter I included the following paragraph:
	Can I ask you to set out exactly what the position is that you have reached, and if it is one which is contrary to the wishes of my constituent
	my constituent is happy to have this drug tried; he is aware of the potential side effects but he still wants to go ahead with it
	whether you would now reconsider this issue, given both his direct wish and the views of your own specialist?
	I indicated in my letter the urgency because all the time it is possible that my constituent may go blind almost overnight, given the nature of the condition from which he suffers.
	I am sorry to say that my letter did not engender the speedy and considered response from the chief executive for which I hoped. It was with some surprise that I had to indulge in a good deal of chasing up before I received a reply. I am disappointed by the laggardly way in which the chief executive appears to have dealt with the case and with my correspondence. I had to ring his office on 12 March to remind him that I had not had a reply. On 23 March, having had no reply to my earlier phone call a further 10 days back, I had to write to him again. I can assure the Minister that it is not the sort of letter that I normally write. I wrote:
	If I have not received a reply within the next 7 days I shall be raising my constituent's case and your failure to respond to my letters both with the Health Minister and on the Floor of the House of Commons.
	That was sent after I had given Mr. Balmer two months to deal with the case of my constituent, who was about to go blind.
	Having faxed that letter, there was a reply the same day. He wrote:
	There is not sufficient or new evidence to support the use of Infleximab
	by the way, he spells it incorrectly
	routinely in patients with chronic sight threatening posterior uveitis who are unresponsive or refractory to other treatment modalities. In the absence of this evidence, including effectiveness, a formal protocol-driven ethically approved evaluation needs to be conducted for local experience of appropriateness, clinical effectiveness and safety.
	So he raised concerns about whether it is appropriate for the drug to be used for this particular condition.
	The second bullet point in the letter was as follows:
	There also needs to be a formal agreement with the partner Trust for the administration of the drug infusions. This currently does not exist.
	It is true that it does not exist. It does not exist because the PCT has been unable to get one from Mr. Balmer and his management team, notwithstanding the wishes of the consultant. It is rather disingenuous to say that an agreement does not exist when he has been the person, as far as I can tell, who has prevented the agreement from being reached in the first place.
	Most depressingly of all, Mr. Balmer writes:
	I am afraid we cannot find a way forward for this particular patient at the moment.
	That is not exactly the sort of message that my constituent wants to hear from the chief executive of the Moorfields Eye Hospital NHS trust, the stated purpose of which, presumably, is to help people with eye conditions. It took Mr. Balmer two months to tell me that he could not find a way forward.
	I then wrote to the Secretary of State about the matter. I explained the position and in quick timefar quicker than Moorfields Eye hospitalI received a speedy response from the Minister's colleague, Lord Warner, on 21 April. Lord Warner, in his helpful letter, stated:
	You may find it helpful to know that a hospital consultant can prescribe any product, including any unlicensed product, which they consider to be a drug necessary for the treatment of their patients under the NHS. When a patient is being treated at a hospital, the consultant can arrange for the supply of any drug, even one not normally available on NHS prescription, provided that the PCT or NHS Trust agree to supply it at NHS expense.
	That offers a wide remit to any consultant. Rightly the Minister continues:
	GPs and hospital doctors are, of course, ultimately responsible for their own prescribing decisions.
	It is absolutely right that that should be the case. Lord Warner concludes:
	It is therefore open to Mr. Patrick's consultant to prescribe Infliximab for him if it is considered safe and of therapeutic benefit.
	It is clear from Lord Warner's letter that the decision should remain with the consultant. The consultant takes it on his or her head when taking a prescribing decision. That is subject only to the PCT or the NHS finding or funding the supply, and this drug is reasonably expensive. My constituent wonders whether that is an issueeveryone denies that it isin his case.
	According to the Minister and the Government, the consultant can supply
	any product, including any unlicensed product which they consider to be a drug necessary for the treatment of their patients under the NHS.
	However, the NHS trust for which the consultant works will not supply it and the PCT in my area will not fund it because it does not want to cross the management at Moorfields. As the Minister will gather, we have a drug that the consultant wishes to prescribe, that my constituent wants to try and that, according to the Government, the consultant is empowered to prescribe under the NHS, but its prescribing has been blocked by the management at Moorfields Eye hospital, a body from which we might expect help for people with sight difficulties.
	The Minister will realise that I have gone round the houses in an attempt to find a way forward, but each body appears to send the matter to someone else. I asked the PCT to reconsider its decision and, on 5 July, it wrote back to me. The PCT in my patch has been helpful and has done its best in a very difficult position between a rock and a hard place to find a way forward. I have no complaints about its approach. Its letter expressed its considered view and said:
	We cannot, and would not, attempt to force Moorfields to prescribe a drug when their clinical governance body has decided that the evidence does not support its use.
	There we are. The PCT rebuts the idea that there may be any cost consideration and adds:
	We have and will continue to be guided by Moorfields as to the appropriateness of this drug.
	That does not reflect Lord Warner's view that the consultant could prescribe the drug and the PCT could fund it. The two positions are at odds.
	We have moved on from November 2002 when my constituent's consultant first wanted the drug prescribed through to the middle of 2004 and we have got no further forward despite the consultant's determination to prescribe it. Professor Susan Lightman has set out her position in blunt language. For example in a letter to me of 3 December 2003, she said:
	The letter from the Chief Executive is completely inaccurate and does not reflect the situation at all.
	She has been battling away for her patient as I hope that I am for my constituent.
	Having reached this point, the next thing I did was to get back to Mr. Balmer, the person who had taken two months to reply to my letter and had done so only because I said that I might raise the matter in the House of Commons. After many phone calls, many attempts to find him and after ringing his secretary on a number of occasions, I finally got to speak to him on 23 July. He held to his position that it was not a matter of money, but of the lack of any proof that the treatment worksthat is the phrase he used; I wrote it down at the time.
	I said to Mr. Balmer that if he had genuine concerns about using an unlicensed product, his consultant did not and, with respect to Mr. Balmer, the consultant was a medical person and not a manager. However, if Mr. Balmer did not want to use the product, I asked him about his plan B. Without a plan B, my patient will go blind. No plan B is there from Mr. Balmer. As he had said:
	I am afraid that we cannot offer a way forward for this particular patient at the moment.
	I asked him to make inquiries to find out whether there was any way that he would reconsider the decision of the Moorfields management to block its consultant from prescribing the drug. If that were not possible, I asked him to come back to tell me how he would help in another way to save the sight of my 31-year-old constituent. He promised to do so. Almost five months on, I am still waiting for a reply from Mr. Balmer, the chief executive of the trust. In case he has forgotten, I assure the House that we have telephoned him from my office on more than one occasion and asked him to ring me, but he has not done so.
	Mr. Balmer has shown great discourtesy to my constituent, to a Member of Parliament, which is less important, and to the process whereby MPs represent their constituents. He has effectively written off my constituent and appears to be content to let him go blindnot a very happy analysis of a chief executive of a trust designed to help people with sight difficulties. If nothing else comes out of the debate, I hope the Minister will have inquiries made about why Mr. Balmer seems to be incapable of answering an MP's letters or phone calls about a constituent who is going blind. It is not good enough. Mr. Balmer should examine his conscience.
	As regards the way forward, we are told that cost is not the issue. The arrangement with the PCT has been a red herring. I believe the PCT would be willing to fund the treatment if Moorfields management withdrew its objections. The issue is whether it is appropriate for the drug to be used for the particular condition. My constituent's consultant, Professor Susan Lightman, is in no doubt. She has provided me, the PCT and no doubt her own management with examples in which the drug has been used. She sent me, for example, an extract from the department of ophthalmology and visual sciences at Queen's medical centre, Nottingham. It is entitled Infliximab in the treatment of refractory posterior uveitis and begins:
	Purpose: To determine the efficacy and safety of infliximab in the treatment of refractory posterior uveitis.
	In order not to delay the House unduly, I shall read only the conclusions:
	Infliximab is effective in the treatment of sight-threatening refractory posterior uveitis. However, patients should be thoroughly screened for tuberculosis before treatment and followed up closely during and after therapy with infliximab.
	Professor Lightman also sent me an extract with the same title, Infliximab in the Treatment of Refractory Posterior Uveitis from the American Academy of Ophthalmology, which reported the following results:
	Four of the 5 patients who were treated with infliximab responded to the therapy with resolution of uveitis within 6 weeks of the first dose and were able to discontinue all other immunosuppressive therapy. These 4 patients did not experience any adverse effects of infliximab.
	It worked for four out of five patients.
	A young man with a promising career is going blind. He has already lost one eye and, because of his condition, could lose his other eye at any time. His professional consultant believes there is a possible way forward for him through the prescription of infliximab. She has demonstrated that it has been tested elsewhere, and the results that she has found suggest that it can be effective without, in the cases referred to, side effects.
	There may well be side effects. My constituent accepts that, but he is young, he is going blind and he wants to try the treatment. His consultant wants to prescribe it for him and, in my view, he should be allowed to undertake that trial. He should be allowed the chance to save his sight. If he cannot save his sight in that way, what is plan B? It is not sufficient for the chief executive to say that nothing more can be done for this patient. I do not want to condemn my constituent to blindness when a possible solution is there, waiting for him. I hope that in his reply the Minister will give him some hope.

Stephen Ladyman: I congratulate the hon. Member for Lewes (Norman Baker) on securing this evening's debate. I have no doubt that his constituent is grateful for the interest that he has taken in the matter over a long period of time.
	I regret the fact that the hon. Gentleman has had such a torrid time getting responses. It is difficult to see what excuse there might be for the lack of courtesy that he experienced.
	I am aware that the hon. Gentleman has corresponded with both the primary care trust and the relevant acute trust, which are the appropriate bodies to deal with the issue. I sympathise with Mr. Patrick. It is a tragedy for a young person to be losing their sight and not to be responding to treatment. I doubt whether any hon. Member would not sympathise with himindeed, we sympathise with all people who are not responding to the available treatments.
	I listened carefully to the points that the hon. Gentleman made, but I hope that Mr. Patrick and he accept that my powers are limited. Furthermore, I hope that he agrees that, in line with patient confidentiality, it would not be appropriate for me to comment in detail on the individual aspects of that particular case. He may have been given leave to raise those issues in public, but I have not, so I must largely limit myself to general comment.
	The hon. Gentleman raised several points about the handling of Mr. Patrick's case by Moorfields eye hospital and his local primary care trust. The first reason why my powers are limited is because the key trust involved, Moorfields eye hospital, is an NHS foundation trust. Foundation trusts are independent organisations that are no longer accountable to the Department of Health or to Ministers. Instead, they are accountable to four other groups and bodies: first, their members, via a board of governors; secondly, primary care trusts, for the delivery of NHS services; thirdly, Monitor, the independent body responsible for regulating foundation trusts; and fourthly, Parliament, which is responsible for the legislation that creates foundation trusts.
	Because of foundation trusts' independent status and separate, local route of accountability, Ministers are no longer in a position to comment on or become involved in their day-to-day activities. We also have no powers of direction or intervention over those trusts. Freeing foundation trusts from the backstop of the Secretary of State's powers of direction and Department of Health control means setting out and applying clear sets of rules for the regulation of foundation trusts and intervening only when things go wrong, which is the task of the foundation trust regulator, Monitor.
	Monitor needs to ensure that foundation trusts are fully compliant at all times with their terms of authorisationa sort of licence to operateand the legislation, so that they deliver NHS services to NHS patients effectively, efficiently, economically and confidently. It has powers to intervene where necessary in the running of a foundation trust in the event of failings in its health care standards or other aspects of its activities that amount to a significant breach of the terms of its authorisation. That ensures that a foundation trust that is failing to meet its obligations can be brought back into line. Monitor will intervene only if it feels it necessary.
	In this particular case, I am aware that Monitor has considered Mr. Patrick's treatment, which it considers a matter for Moorfields eye hospital. That brings me to the specifics on the approval or non-approval of the treatment, and I stress that the issue does not concern funding. Instead, this is a case in which the PCT and the trust have not prescribed a drug because it is not licensed for that particular indication and because no new evidence exists to support its use. When a patient is treated at any hospital, whether or not that hospital is within a foundation trust, the consultant may prescribe any drug, including unlicensed medicines, as appropriate. That is what my noble Friend Lord Warner said in his letter to the hon. Gentleman. However, trusts have multi-disciplinary drugs and therapeutics committees that oversee the clinical and cost-effective use of medicines within their organisations, and all prescribing should have the support of that committee.
	Of course, consultants are ultimately responsible for their own prescribing decisions. They should always satisfy themselves that the medicines that they consider appropriate for their patients can be safely prescribed, that patients are adequately monitored and that, where necessary, expert hospital supervision is available.
	In March 2002, the National Institute for Clinical Excellence recommended the use of Infliximab for highly active rheumatoid arthritis in adults who have failed to respond to at least two standard drugs. However, Infliximab is not licensed in the UK for the eye condition that Mr. Patrick has and there is no sufficient or conclusive evidence to support its use for that condition, hence the decision taken by Moorfields.
	A group of expertsthe drugs and therapeutics committeehas decided that the potential harm to the patient from this treatment, including severe blood disorders and septicaemia, outweigh the unproven benefit for his condition at this time. I stress that the decision was taken by the drugs and therapeutics committee, which is a committee of experts, not a group of managers or people without expertise in such matters. Moorfields, as advised by its drugs and therapeutics committee, does not currently include this drug within its supported formulary.
	If I might offer a glimmer of light at the end of the tunnel, I am assured that the position could change as further evidence regarding the efficacy and safety of the drug in ophthalmic treatment becomes available. At the moment, however, the trust's position is that further research will need to be done before the clinical governance body will review the decision. I understand that the trust will continue to explore other possibilities that might help Mr. Patrick and other patients, including access to existing or future research trials.
	As the hon. Gentleman spoke, I was struck by the length of time that this case has gone on. That might indicate that the clinical governance body last reviewed it before some of the evidence that he brought to the House's attention was available. One of the courses of action that could be taken, if it has not been done already, is for the consultant to put that body of evidence before the body and ask whether it considered it before making its decision.
	I understand that it was hoped that a research programme could be set up in the Moorfields area that might have been able to help Mr. Patrick, but unfortunately that has not happened.
	The hon. Gentleman asked about the relationship between the trust and the primary care trust. Sussex Downs and Weald, the PCT that commissions services for residents, including Mr. Patrick, has considered the case. The PCT has a contract for specialist eye services with Moorfields, and general services are available locally. However, the specialist treatment that Mr. Patrick's consultant recommended is not supported by the trust, and therefore the PCT cannot fund it. I am assured by the PCT that, if different treatment options that were licensed for Mr. Patrick's condition were suggested, or if sufficient clinical evidence emerged to support the use of this unlicensed treatment, the PCT would consider funding. However, the PCT has made it clear that it cannot and would not attempt to force Moorfields to prescribe the drug when its clinical governance body has decided that the evidence does not support its use. The decision was not taken by accountants or managers, nor by the PCT. Like Moorfields, the PCT did not decide against the treatment for financial reasons.
	Clinical governance is the collective responsibility of the clinicians at the hospital. Those clinicians have decided that the available evidence does not support the use of Infliximab in ophthalmology at the present time. The PCT has made it clear that it will continue to be guided by Moorfields as to the appropriateness of the drug as and when further clinical evidence is forthcoming.
	If a drug is prescribed privately, the clinician will be bound by codes of clinical governance but will be held entirely responsible for the consequences if the clinician decides to prescribe it. But when, as in this case, a drug is prescribed or requested to be prescribed on the national health service, the NHS must share responsibility for the decision.
	The rules for arriving at decisions about the drugs that can be prescribed, the validity of the evidence of efficacy and risk and the balance of the two are, therefore, agreed with the clinicians at the trust and they cannot be overturned by an individual clinician. Of course, that clinician has the opportunity to put forward reasons and make the case for the drug to be prescribed. The clinician has the opportunity to bring forward evidence that he or, in this case, she thinks has been overlooked and can even explore the opportunities for becoming involved in trials to establish that evidence. However, in the absence of that evidence, or having failed to establish a convincing case, the clinician cannot expect to have his or her personal judgement put in the place of that of his or her colleagues. He or she cannot try to make the case that everyone else's judgment is flawed.
	I assume that the consultant has based the view that the drug may help the hon. Gentleman's constituent on evidence. If it is strong enough to convince the consultant, it should also be strong enoughif the consultant puts the caseto convince the clinical governance committee. I therefore encourage the hon. Gentleman to speak to the consultant to ascertain whether new evidence, which the committee has not yet considered, has recently emerged, and to have another go at making the case. If the consultant can be convinced, so can the committee.
	Politicians should not question the good faith of those who made the decisionthat would be disingenuous to say the leastand claim that the decision must have been made on the ground of cost. The decision in the case that we are considering was not made on that ground, although I can understand why the hon. Gentleman is becoming angry with the trust's chief executive if he cannot even get information or responses to correspondence.
	As I said earlier, I sympathise with the hon. Gentleman's constituent but I cannot and will not intervene. I certainly would not want anyone to see the decision changed until safety issues are resolved. However, if the hon. Gentleman and his constituent are dissatisfied with the answers that they have received from the trust, Mr. Patrick can, of course, complain to Moorfields about his treatment.
	New regulationsthe National Health Service (Complaints) Regulations 2004came into force on 30 July this year. Although those regulations do not require foundation trusts to have a local complaints procedure, they will more than likely have their own process for addressing patients' concerns. In any event, patients can complain to the Healthcare Commission and ultimately the health service ombudsman if they are unhappy with the treatment that they have received from a foundation trust. Mr. Patrick can also complain about the actions of the PCT if he wishes by first setting out his concerns to the PCT. If he remains unhappy, he can approach the Healthcare Commission and, ultimately, the health service ombudsman.
	The hon. Gentleman said that he was satisfied with the efforts that the PCT had tried to make on his constituent's behalf and I am pleased to hear that. However, he is clearly far from satisfied with the efforts of Moorfields. I therefore strongly urge him to consider the complaints route and, if necessary, approach the Healthcare Commission. The chief executive reports to a board at the foundation trust. If the hon. Gentleman believes that the chief executive is not dealing with the issue appropriately, he might wish to approach members of the board and ask for the issue to be raised. The Healthcare Commission will make Monitor aware of all complaints that relate to foundation trusts. It will therefore be told of the matter if the hon. Gentleman pursues a complaint.
	I hope that the matter reaches a satisfactory conclusion but I must stress again that it is for the NHS to resolve on the basis of evidence and expert clinical opinion. It is not a matter of moneyit never wasand to suggest that that is the case is deeply unfair and, more important, will mislead Mr. Patrick and may indeed give him false hope.

Norman Baker: I accept that this is not a matter of money. I merely reported that my constituent was beginning to think that it might have been, given the apparent intransigence and the difficulty in securing an outcome.

Stephen Ladyman: It is fair of the hon. Gentleman to say that. Let me stress that, following the inquiries that I have made in preparing for this debate, I have received assurances that this is not a matter of funding but of evidence. It is a question of getting evidence about efficacy in regard to the condition that Mr. Patrick is suffering from and evidence on safety issues. If that evidence can be presented, the decision can be further reviewed.
	I suggest that the hon. Gentleman and his constituent find out whether the consultant believes that all the latest evidence has been put to the governance committee so that it can reconsider the issue. I also suggest that they consider complaining about the matter to the Healthcare Commission, if the hon. Gentleman feels that that is the appropriate route to take, and to consider ensuring that members of the board of the foundation trust are aware of the issue and the way in which it has been handled, and of Mr. Patrick's dissatisfaction with the way in which it has been handled.
	I will ensure that the official record of this debate is passed to the chief executives of the primary care trust and of the Moorfields trust. I will ask them to read it carefully and to consider whether they are acting on the latest evidence and whether they could, on reflection, find any way to help Mr. Patrick.
	Question put and agreed to.
	Adjourned accordingly at twenty-six minutes past Six o'clock.